KENYA Public Disclosure Authorized
Total Page:16
File Type:pdf, Size:1020Kb
RESTRICTED Report No. AF-26a FILE COPY This report was prepared for use within the Bank and its affiliated organizations. Public Disclosure Authorized They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized THE ECONOMY OF KENYA Public Disclosure Authorized July 10, 1964 Public Disclosure Authorized Department of Operations Africa CURRENCY EQUIVALENTS 100 EA cents = 1 EA shilling = U.S. $0. 14 20 EA shillings = L 1 sterling = U. S. $2. 80 6 1 million sterling = U. S. $2. 8 million U.S. $1 = 7. 15 EA shillings U.S. $1 million = L 357, 143 TABLE OF CONTENTS Page IIaps Charts Basic Data Suanary I. BACKGROUND . .. a 1 Country and People . .. .. .. .. .... 1 Constitutional and Political Developments . 2 II. THE EC ONOMY . a o. o. * 5 Structure and Growth . Agriculture . .. 6 Forestry . Q . .. .o . 11 Tourism and Wildlife . .. 12 YMining and Manufacturing . 12 Construction . 13 Electricity and Water ....... 13 Transportation . 13 Government Services . .. ..... 14 Foreign Trade and Payments *. .* . * .. 15 Capital Formation 0 . 0 . 17 Employment, Earnings and Prices . ... ... , . 18 Money and Credit a . C . 0 a a. - 19 Public Finances . ., a . 21 III. THE DEVELOPMEN4T PLAN . 23 IV. PROSPECTS AND CONCLUSIONS . ........ 26 STATISTICAL APPENDIX Li /- c a i: rr i4- æ r> KENYA AGRICULTURAL AREAS AND TRANSPORT C 5 ------. 4 E T H 1 O P l A.... .: S O M A L l A HoR T H E TE R H u G Au D A o" EA 5 T E R N To, ir O A s T a avar-....r...øso e. m/NERALDE'PoSiTS AS SHOWNGz J)NE1964 IBRU1366 KENYA MAIN COMMODITIES EXPORTED (PERCENTAGE OF TOTAL VALUE) 1954 1963 OTHER 24.8% OTHER 26.9% COFFE COFFEE 28.1% WATTLEE PYRETHRUIM LIVESTOCK PRODUCTS 8.4% TEA 10.3% SISAL 9.9% PRODUCTS TEA 13.0% 11.3% TOTAL: f 20.3 MILLION TOTAL: L 43.8 MILLION BALANCE OF EXTERNAL AND INTERTERRITORIAL TRADE (MILLIONS OFk) 80 80 NET IMPORTS 60-- 6 0 40 40 > EXPORTS TO COUNTRIES OTHER THAN UGANDA AND / TANGANYIKA 20 -F 20 / TRADE BALANCE WITH / UGANDA AND TANGANYIKA 0 I I I- _ _ _ _ 0 '46 '50 '54 '55 '56 '57 '58 '59 '60 '61 '62 '63 6/10/64 IBRD- Economic Deportment 2364 (R) KENYA SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT (MILLIONS OF DOLLARS) 60 I I I I I I 00 50___KENYA'S OWN DEBT PLUS 50 - -DEBT INCURRED FOR 50 KENYA'S OWN DEBT PLUS DEBT RAILWAYS AND HARBORS INCURRED FOR RAILWAYS AND HARBORS *. PLUS CONTINGENT DEBT SHARED 40- - - WITH UGANDA AND TANGANYIKA 40 30- 30 20-2 OWN DE BT 00 Il*......--e* KEN YA' S '46 '50 '53'55 '60 '65 '70 '75 '77 : ACTUAL PROJECTED > WORLD PRICES OF MAJOR EXPORT COMMODITIES (DOLLARS PER 100 LBS.) (I PER LONG TON) 80 II200 COFFEE (MANIZALES) LEFT SCALE) %x(+-- WRGHT SCALE I~ 20 50 0 '54 '55 '56 '57 '58 '59 '60 '61 '62 '63 *U.K.,annual overage prices at London auctions for East African tea. *'K'East Africa No.l, c.i.f. European parts. 6/10/64 18RD-Economic Department 2365 BASIC DATA Area: 225,000 square miles - 583,000 square km. Population: Total (June 1963) 8.6 million Rate of Growth 3% (1948-62) Total non-African population ' 270,000 Density of total population - 15 per square km. Political Status: Independent since December 12, 1963 Member of Commonwealth Membershio: Bank, IDA, IFC - February 3, 1964 Total GDP (as of 1963): I 260 million $ 728 million % of GDP from: mining and manufacturing 9.8% cash agriculture and livestock 20.% subsistence agriculture 25.65 Rate of growth of GDP - 1954-58 7.1% 1958-62 3.9% Percentages of Monetary GDP (1963) Gross investment 15% Gross savings 12% Exports (incl. East Africa) 34% Balance of payments c/a deficit (1962) 3% Taxation 18% Total money supply n.a.1) Per Capita GDP (1962-63): $80 at present exchange rate Currenc-: East African shillings Value in dcllars 0.14 Member of L area and the East African currency area. Public Finances: Latest budget as of 1963/64 (estimates): Current receipts Ts49.5 million Current expenditures TO0.5 million Current deficit -bl.0 million Total budget investment expenditure U14.7 million in U.S. $ equivalent Total external public debt (as of April 30, 1964): 173.7 Total annual debt service (1964): 12.4 Debt service ratio as % of total exports 10% Balance of Payments (1963) in U.S. $ equivalent Total exports 173.6 Total imports 230.0 Net invisibles +15.1 Net current account balance - -13.4 Rate of growth in export value: 1954-62 9.8% No data are.available on currency in circulation in individual countries of the East African currency area. Basic Data (continued) External Assistance In U.S. $ equivalent 1954-60: grants 112 loans 46 Since 1960 (as of 1963): Total made Total Total Source available Committed disbursed United Kingdom n.a. n.a. 103.5 United States (June 163) 8.1 8.1 n.a. IBRD (April '64) 14.0 10.2 5.6 West Germany 14.0 14.0 10 I1F quota $25 million (undrawn as of June, 1964). Bank/IDA/IFC Assistance Purpose Date Amount Bank loans African agriculture (256) May 27, 1960 $5.6 million Land Settlement (303) Nov. 29, 1961 $8.4 million IDA Credits - IFC investments SUMMARY 1. Kenya is an equatorial country the size of France on the East Coast of Africa, with a variety of climates and soils. Population and economic activity are concentrated at the coast and in the highlands. Agricultural land is the country's main asset and farming the dominant occupation for its nine million inhabitants, 97% of whom are Africans. Population growth is about 3% annually. In recent years, the African contribution to the mone- tary economy has been increasing rapidly, mainly through higher sales of coffee, cotton, pyrethrum, tea and sisal, and the marketing of livestock products. Europeans and Asians control most of Kenya's monetary economy, which includes an efficient large-scale farming sector providing 80% of - cash agricultural production and exports, and a small but important indust- rial establishment producing a variety of goods for the East African market. Transport, banking and other services are also sigIficant. Asians play an important role in commerce and provide skilled manpower in industry and - government. Europeans are engaged in farming and plantation industry, manu- facturing, government and professional services. 2, Independence was achieved in December 1963. The present government, drawn from the majority party, the Kenya African National Union (KANU), is led by Mr. Jomo Kenyatta as Prime Minister. It strongly supports the - East African common market. Africanization of the civil service is rapid- ly pursued. An African take-over of parts of the large-scale farming sector is under way to relieve landlessness. Development efforts are pushed on a broad front to increase agricultural output and attract new industries - with a view to raising living standards and reducing the pressure of unem- ployment. 3. Economic growth since the war has been uneven. Extensive capital formation financed by an inflow of foreign funds made possible a boom in production and exports in 1954-59, which was followed by setbacks from bad weather and a loss of confidence among the non-African community as a result of political- uncertainties. Per capita income stagnated at about $80 per year in 1960-62. Normal weather and a partial return of confidence has made possible a renewal of economic expansion in 1963. The improve- ment was aided by a rise in export income partly as a result of higher sisal prices, 4. Any evaluation of Kenya's economic prospects must be surrounded by a wide margin of uncertainty because of the many unpredictable political factors involved. Present fairly satisfactory economic performance is - to a great extent based on the maintenance of European large-scale farm- ing and the retention of expatriate officers in the government services. Too rapid Africanization of these sectors could lead to a serious drop in production which might be difficult to regain. The border dispute - ii - with Sonalia, tensions between racial groups or between tribes may force the- government to actions not conducive to economic progress. Much of the reviv- al of confidence by the non-African groups has stermed from the faith they place in the fairness of the Prime Minister. 5. Export prospects are good for sisal, tea and cotton, at least in the forseeable future. They are less encouraging for pyrethrum due to-previous overstocking, and Kenya coffee may be heading for a crisis of over-production.- Kenya has considerable livestock potential which could be utilized for increas- ing exports as well as improving the local diet. An expansion of the manu- - facturing and service industries could take place on the basis of a maintain- ed and strengthened East Africa common market. Provided economic development is not seriously impeded by political factors, therefore, real growth rates of 1-2jo per year on a per capita basis should be within reach. 6. In the longer run,economic growth will be increasingly dependent on an increase in capital formation, which must be supported by a renewed inflow of funds. The government's new economic development plan for 1964/67 follows in the main the recommendations by the 1962 Economic Survey Mission. Emphasis is placed on agricultural schemes such as a continuation of the successful consolidation and development of African smallholdings, resettlement of Africans on former European farms, and opening up new lands by means of irrigation.