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Kenya Kenya at a Glance: 2001-02

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Kenya Kenya at a Glance: 2001-02 COUNTRY REPORT Kenya Kenya at a glance: 2001-02 OVERVIEW Political instability has been the hallmark of President Daniel arap Moi’s government. The situation is not expected to improve greatly during the forecast period, when electoral pressures will intensify internal conflicts in the ruling Kenya African National Union (KANU) as well as in the opposition parties. Economic reform, supported—in the final months of 2001—by the IMF and World Bank, will remain a priority in 2001-02. The steady growth of earnings from exports and tourism will help to reduce the overall current-account deficit in 2001-02. Key changes from last month Political outlook • Relations between donors and Mr Moi are expected to remain extremely strained in the short-term, owing to the president’s wavering commitment to public-sector reform and governance issues. • Any attempt by the president to stand for another term by amending the constitution is expected to draw a stern rebuke from donors, and likely to complicate negotiations on debt restructuring and aid inflows. Economic policy outlook • An IMF team is due to visit Kenya in May to review the government’s achievements in curbing corruption and promoting privatisation. However, IMF lending is not likely to resume until late in 2001. This will undermine investor confidence, forcing up interest rates and threatening economic recovery. • Another tight budget for 2001/02 is expected to be announced in June, following the withdrawal of donor support and weker economic activity this year. Economic forecast • Economic growth prospects for the country remain essentially unchanged from last month: real GDP is forecast to grow by a modest 2.5% in 2001 and a higher 4.1% in 2002. May 2001 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2001 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 0269-4239 Symbols in tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Kenya 1 Contents 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2001-02 7 Political outlook 8 Economic policy outlook 9 Economic forecast 12 The political scene 17 Economic policy 21 The domestic economy 21 Economic trends 23 Agriculture 24 Financial and other services 25 Energy and infrastructure 26 Foreign trade and payments List of tables 9 International assumptions summary 11 Forecast summary 21 Gross domestic product 22 Budget, Jul-Feb 22 Monetary indicators 24 Food imports List of figures 12 Gross domestic product 12 Kenya shilling real exchange rates © The Economist Intelligence Unit Limited 2001 EIU Country Report May 2001 Kenya 3 Summary May 2001 Outlook for 2001-02 President Moi’s last term in office under the existing constitution will be dominated by the country’s growing economic problems. The battle for succession within KANU will also be a major destabilising factor, as the party’s structure is very fragile and will continue to fragment in unpredictable ways. Economic reforms aimed at restoring donor support will continue to shape policy, but relations between donors and Mr Moi are expected to remain extremely strained in the short-term, owing to the president’s wavering commitment to public-sector reform and governance issues. Also, any attempt by the president to stand for another term by amending the constitution is expected to draw a stern rebuke from donors, and highly likely to complicate negotiations on debt restructuring and aid inflows. It is now assumed that the release of the IMF’s second tranche under the PRGF agreement will take place in the final months of 2001. The EIU has revised its forecast for real GDP growth downwards to 2.5% in 2001 and 4.1% in 2002, following the IMF’s decision in March to withhold its second payment under the current PRGF agreement. We have also revised our current-account forecasts for Kenya, largely because lower net transfers inflows are now expected—particularly this year—following the IMF’s decision to withhold funds. The political scene The departure of Richard Leakey as head of the civil service, and the subsequent replacement of prominent members of his “dream team”, including the central bank governor, Micah Cheserem, has cast doubt over the government’s commitment to the reform process. KANU hardliners have continued to resist a number of the Kenya Review Commission’s proposals, including the Constitution of Kenya (Amendment) Bill 2001. Economic policy The stalemate between the IMF and the government has forced to authorities to cut back on spending during the current fiscal year of 2000/01. In mid- March the IMF chose once more to withhold lending to Kenya, and expressed its dissatisfaction on several matters, including the stalled privatisation programme. The domestic economy The forecast for real GDP growth in 2001 has been lowered, while recent official data confirm that inflation is set to dip in 2001. The planned sale of the government’s stake in KCB to a strategic investor has now been suspended. Foreign trade and payments The East African leaders have unveiled a five-year development strategy for the community. Kenya is considering handling its relations with the EU through Comesa rather than the EAC. Editors: Pratibha Thaker (editor); David Cowan (consulting editor) Editorial closing date: May 14th 2001 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule © The Economist Intelligence Unit Limited 2001 EIU Country Report May 2001 4 Kenya Political structure Official name Republic of Kenya Form of state Unitary republic Legal system Based on English common law and the 1963 constitution; a new constitution is expected to be in place by December 2001 National legislature Unicameral National Assembly of 210 elected members, 12 nominated members, the attorney-general and the speaker; a multiparty system was introduced in December 1991 National elections December 1997 (presidential and legislative); next elections due by end-2002 Head of state President, directly elected by simple majority and at least 25% of the vote in five of Kenya’s eight provinces National government The president and his cabinet, composed entirely of members of the ruling Kenya African National Union (KANU); last major reshuffle in September 1999, when the number of ministries was reduced from 27 to 15 Political parties in parliament KANU (118 seats); Democratic Party (DP, 39 seats); National Development Party (NDP, 22 seats); Forum for the Restoration of Democracy (Ford-Kenya; 18 seats); Social Democratic Party (SDP, 14 seats); Safina (5 seats); Ford-People (3 seats); Ford-Asili (1 seat); Kenya Social Congress (KSC, 1 seat); Shirikisho (1 seat) President & commander-in-chief Daniel arap Moi Vice-president George Saitoti Key ministers Agriculture, livestock Chris Obure, & rural development Hussein Maalim Mohammed Education, science & technology Stephen Kalonzo Musyoka, Henry Kosgey Energy Francis Masakhalia Environment & natural resources Kipng’eno arap N’geny, Francis Nyenze, Jackson Kalweo Finance & planning Chrysanthus Okemo, Gideon Ndambuki Foreign affairs & international co-operation Bonaya Adhi Godana Health Sam Ongeri Home affairs, heritage & sport Noah Katana Ngala Information, transport & communications Musalia Mudavadi Labour and human resource development Isaac Ruto, Joseph Ngutu Lands & settlement Joseph Nyagah Local government Joseph Kamotho Office of the president Marsden
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