• Abstract and Figures
• Public Full-text

COUNTRY REPORT Kenya Kenya at a glance: 2002-03 OVERVIEW Political stability in Kenya is not expected to improve during the forecast period because electoral pressures will intensify conflicts within the ruling Kenya African National Union and the opposition. Relations with the IMF will remain difficult, and the government’s hope for a resumption of donor support is unlikely to be fulfilled in 2001. The Economist Intelligence Unit forecasts that the economy will recover strongly in 2002-03, provided that donor funding is resumed. Private-sector activity and investment will also increase as the government makes progress with its long-delayed privatisation programme. Monetary policy will be geared towards maintaining the relative strength of the currency and keeping inflation in check. The current-account deficit is forecast to improve from 2.9% of GDP in 2002 to 2.5% of GDP in 2003, owing to rising exports, net transfers and tourism receipts. Key changes from last month Political outlook • Uncertainty over who will succeed President Daniel arap Moi as president and leader of KANU will impede political effectiveness. Inter-tribal violence is likely to increase as the elections—which are due to be held by the end of 2002—approach. Economic policy outlook • The appointment of a new finance minister, Christopher Obure, is not expected to lead to a change in economic policies over the forecast period. Economic forecast • Real GDP growth for 2001 has been revised slightly downward to 1.3%, from our earlier estimate of 1.8%, in line with recent firm data for the first seven months of the year. • Assuming that donor support is resumed, we forecast real GDP growth of 2.5% in 2002 and 3% in 2003. December 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 for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Kenya 1 Outlook for 2002-03 Political outlook Domestic politics It is clear that the general election due at the end of 2002 and the battle for President Daniel arap Moi’s succession will dominate Kenya’s political agenda over most of the forecast period. The imminent merger between the ruling Kenya African National Union (KANU) and the National Development Party (NDP) has gained momentum following a decision by KANU’s National Executive Council, chaired by President Moi, to create nine new posts within the ruling party. The expansion of the structure of the ruling party—and its merger with the NDP—was agreed at a meeting of KANU and NDP national delegates in late August. Moreover, Mr Moi formally announced on October 20th (Kenyatta Day) that he would hand over to a younger person “when the time is right”. In the past he has only either alluded to his retirement or his desire to be succeeded by a younger politician; this was the first official announcement that he will retire. However, there are still a number of unresolved issues surrounding President Moi’s retirement. First, he did not specify when he would step down, only saying that he would do so when the time was right. He also made it clear that after handing over the presidency, he would like to continue serving Kenya in many other capacities, as well as retaining his position as the KANU national chairman. Therefore he obviously intends to remain an important political player behind the scenes. Meanwhile, the motion to allow Mr Moi to stand for a third presidential term has been withdrawn from the agenda of the National Assembly, following a recommendation by the KANU parliamentary group. The most likely outcome is that President Moi’s current term in office, and that of parliament, will be extended by one or two years, because the constitutional review process will not have been completed by the end of 2002—this will probably have the support of all sides in parliament. This extension of Mr Moi’s current term of office, and the fact that he has committed himself to stepping down, should give him to time to choose his successor (which will give him greater influence from behind the scenes). There is little doubt that the succession battle will take greater precedence than the need for structural reform and economic recovery on Kenya’s political agenda in 2002. It is too early to predict with confidence who will succeed Mr Moi, although the front runner is certainly Musalia Mudavadi—the former finance minister and now the minister for information, transport and communications. Developments over the next few months will give a clearer picture of the succession issue. Cabinet reshuffle A cabinet reshuffle has resulted in the removal of another Kenyan finance minister, Chris Okemo. Like others before him, Mr Okemo found it difficult to balance the demands of the international financial community and internal politics. For example, having announced a bold budget for 2001-02 guided by a combination of the medium-term expenditure framework and the poverty reduction strategy paper, an end-October speech delivered on Mr Okemo’s behalf stated that the IMF had "coerced" Kenya into misguided economic EIU Country Report December 2001 © The Economist Intelligence Unit Limited 2001 2 Kenya policies. The problem for Mr Okemo—and now for his replacement, Chris Obure (formerly the foreign minister)—is twofold. Economic growth, which is forecast to average only 2.9% per year in 2001-05, down from around 6% per year in the latter half of the 1980s, will not recover without a resumption of donor support. However, progress towards improved relations with donors is almost bound to be slow, since most of the contentious issues relate to legislation on economic governance and must therefore be dealt with by parliament. The change of finance minister will not alter the situation, and the current impasse between the Bretton Woods institutions and the Kenyan government is thus highly unlikely to be resolved before the end of 2001. Nevertheless, the Economist Intelligence Unit still believes that the govern- ment does recognise the importance of retaining multilateral approval of its economic policies, and that it will broadly follow the commitments it made to secure a poverty reduction and growth facility in 2002. Donor support is, therefore, likely to resume in the first half of 2002. Inevitably, there is also a more political dimension to the cabinet reshuffle. For some time we have been predicting a major cabinet reshuffle in which KANU’S “young Turks” gain leadership positions, and one of the most prominent members of this younger generation of politicians—Uhuru Kenyatta (son on Kenya's first president)—has now been appointed as local government minister. This is hardly a key post, but it will enable Mr Kenyatta to build substantive ministerial experience, and it does send a clear signal about the latest balance of power, since Mr Kenyatta replaces Joseph Kamotho, a high-profile member of the party's “old guard”. International relations Kenyan foreign policy will be mainly concerned with regional issues. These include efforts to promote greater regional integration through the recently launched East African Community, and the problem of political instability in the Horn of Africa, which is causing bandit activity and an influx of refugees in north-eastern Kenya. However, progress towards resolving both these issues will be slow. Economic policy outlook Policy trends The need to restore IMF support and other donor funds is critical. However, following the government’s recent failure to push through an anti-corruption bill—a crucial prerequisite for the resumption of IMF-World Bank support—the current impasse between the IMF and World Bank and the Kenyan government is not expected to be resolved in the near future.

Load more

  8

Copy Link