The East African nation of Kenya has an estimated population of 46.1 million, which increases by one million a year. With support of the World Bank Group (WBG), International Monetary Fund (IMF) and other development partners, Kenya has made significant structural and economic reforms that have contributed to sustained economic growth in the past decade. Development challenges include poverty and inequality, and vulnerable of the economy to internal and external shocks.
Devolution is rated the biggest gain from the August 2010 constitution, which ushered in a new political and economic governance system. It is transformative and has strengthened accountability and public service delivery at local levels. The government’s agenda is to deepen implementation of devolution and strengthen governance institutions, while addressing other challenges including land reforms and security to improve economic and social outcomes, accelerate growth and equity in distribution of resources, and reduce extreme poverty and youth employment.
Kenya’s growth is projected to rise to 5.9% in 2016 and 6.1 % in 2017. The positive outlook is predicated on infrastructure investments. Fiscal consolidation is expected to ease pressure on domestic interest rates and increase credit uptake by the private sector. The contraction in the current account deficit will continue to be supported by declining commodity prices and rising exports of tea.
Sound monetary policy restored stability in the currency markets and contained the 12-month average overall inflation at 6.6% in December 2015. The Central Bank effectively managed currency volatility and running down Forex reserves to cushion the shilling. So, the Kenya shilling stabilized, and the depreciation moderated in comparison to other regional currencies.
Low commodity prices had a net positive impact in Kenya in 2015. The gains through low oil prices and the rising earnings from tea have offset the loss in earnings from other exports (coffee and horticulture). As a result, the current account deficit contracted from 10.4% to 7.1% of GDP.
According to the October 2015 Kenya Economic Update, Kenya is poised to be among the fastest growing economies in Eastern Africa. Besides, the 2016 Country Economic Memorandum says that Kenya’s growth prospects will depend a lot on Innovation, Oil, and Urbanization on the long term.
Kenya has met a few of the Millennium Development Goals (MDG) targets, including reduced child mortality, near universal primary school enrolment and narrower gender gaps in education. Interventions and increased spending on health and education are paying dividends. Devolved health care and free maternal health care at all public health facilities will improve health care outcomes and develop a more equitable health care system.
Kenya has the potential to be one of Africa’s great success stories from its growing and youthful population, a dynamic private sector, a new constitution, and its pivotal role in East Africa. Addressing challenges of poverty, inequality, governance, low investment and low firm productivity to achieve rapid, sustained growth rates that will transform the lives of ordinary citizens, will be a major goal for the country.
Last Updated: Apr 08, 2016