COUNTRY REPORT Kenya The full publishing schedule for Country Reports is now available on our website at http://www.eiu.com/schedule. 1st quarter 2000 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 subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. 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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 2000-01 11 The political scene 17 Economic policy 20 The domestic economy 21 Finance 23 Agriculture 26 Infrastructure and services 28 Foreign trade and payments 31 Trade data List of tables 7 Forecast summary 18 Government budget outturn, Jul-Dec 19 Government domestic debt 20 Gross domestic product 20 Monetary indicators 29 Balance of payments 29 Foreign debt 31 Foreign trade List of figures 11 Gross domestic product 11 Kenya shilling real exchange rates 20 Inflation and interest rates 23 Nairobi Stock Exchange Index EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 . Kenya 3 March 8th 2000 Summary 1st quarter 2000 Outlook for 2000-01 The debate over who will succeed the president, Daniel arap Moi, is expected to intensify as rival factions jockey for position in the run-up to national party elections, tentatively scheduled for later in 2000. The stalled constitutional review process will remain central to the succession race. The campaign against corruption will continue to suffer setbacks. Insecurity is likely to increase as the general election approaches. The IMF will remain cautious about resuming aid. An improvement in fiscal discipline will be hampered by delays in reforming the civil service. Economic performance will remain poor in 2000. Real GDP is forecast to recover to 4.1% in 2001, largely because of the resumption of IMF funds, stronger growth in agriculture and manufacturing, and continuing growth in tourism. Weak export prices for the country’s major commodities and higher imports will return the overall current account to a deficit of 1.7% of GDP in 2000 and 2.4% of GDP in 2001. The political scene The president has announced that KANU national elections will be held in 2000. KANU “B” has emerged as the strongest faction; the vice-president, George Saitoti, is the current front-runner to succeed President Moi. The opposition has failed to take advantage of the disputes within KANU. The constitutional review process has stalled. The campaign against corruption has continued, with an investigation into Nairobi City Council. Insecurity has increased: there have been violent killings and cattle-rustling in many districts. Economic policy The IMF has given no indication of when funding might resume, but is likely to return to Kenya in the near future. Measures of fiscal discipline have been introduced, but proposals to lay off civil servants have been shelved. The government is behind in its debt-servicing obligations. The domestic economy • Growth has remained poor across all sectors. Monetary policy has been relaxed. Leading banks have announced restructuring plans. Provisional census results have been released. • Warnings of famine have been sounded and food aid is urgently required. The coffee and tea sectors are experiencing difficulties. The EU has failed to lift a ban on Kenyan fish exports. • Management of the roads is to be passed to the Kenya Roads Board. Power shortages have continued. Foreign trade and The East African Community has combined to face major problems. The payments current-account deficit has narrowed as imports and exports have continued to decline. Editor: Pratibha Thaker All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Our next Country Report will be published in June EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 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 (presidential and legislative) Head of state President, directly elected by simple majority and at least 25% of the vote in five out of 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, Hussein & rural development Maalim Mohammed Education, science & technology Stephen Kalonzo Musyoka, Henry Kosgey Energy Francis Masakhalia, Francis Lotodo 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, Amukowa Anangwe Home affairs, heritage & sport Noah Katana Ngala Information, transport & communications Musalia Mudavadi Labour and human resource development Kipkalia Kones, Joseph Ngutu Lands & settlement Joseph Nyagah Local government Joseph Kamotho Office of the president Marsden Madoka, Julius Sunkuli, Shariff Nassir, William ole Ntimama Roads & public works Andrew Kiptoon Tourism, trade & industry Nicholas Biwott Attorney-general Amos Wako Head of the civil service Richard Leakey Central Bank governor Micah Cheserem © The Economist Intelligence Unit Limited 2000 EIU Country Report 1st quarter 2000 Kenya 5 Economic structure Annual indicators 1995 1996 1997 1998 1999a GDP at market prices (KSh bn) 465.6 528.0 627.4 699.0 701.4 Real GDP growth (%) 4.4 4.1 2.1 1.8 1.4 Consumer price inflation (av; %) 0.8 8.8 12.0 5.8 3.0 Population (m) 26.9 27.8 28.7 29.6 30.6 Merchandise exports fob ($ m) 1,924 2,083 2,063 2,013 1,969 Merchandise imports fob ($ m) 2,674 2,598 2,949 3,029 2,888 Current-account balance ($ m) –401 –73 –377 –363 100 Reserves excl gold ($ m) 353 747 788 783 650c Total external debt ($ bn) 7.38 6.90 6.49 6.48a 6.02 Debt-service ratio, paid (%) 30.1 27.6 21.5 24.9a 25.4 Marketed tea production (‘000 tonnes) 244.5 257.2 220.7 294.2 290.0 Coffee production (‘000 tonnes) 95.8 103.2 68.0 51.3 64.3 Tourist departures (‘000) 785.7 800.5 744.3 672.0 n/a Exchange rate (av; KSh:$) 51.430 57.115 58.732 60.367 70.383c March 3rd 2000 KSh73.65:$1 Origins of gross domestic product 1998b % of total Components of gross domestic product 1998b % of total Agriculture,