Economic Perspective :: InvestMacro


by XN IrakiAnd the University of Nairobi

Kenya has four presidential candidates in the general elections in August 2022. They recently released their statements and one thing ties them together: the economy.

The economy has not been a major topic in any other Kenyan elections, not only for those who seek power, but for voters as well.

There are two reasons: mature democracy and recent developments affecting the pockets of Kenyans.

The candidates have made many promises. These include salaries for poor families, access to cheaper credit, land reform, non-traditional exports, agricultural subsidies and other interventions. But realistically, the country’s economic challenges will be difficult to overcome and there is only so much the government can do about them.

Focus shifted to economics

When a country develops, economic issues take over center stage. Kenya’s political leaders are transforming a file Campaign focus From personalities and ethnicity to economic well-being and growth. take policy analysis In Kenya through an economic lens for more than 20 years, I have witnessed this transformation.



Between 2015 and 2019, Kenya’s economic growth averaged 4.7% per year. The arrival of COVID-19 in 2020 disrupted this path and the economy Contracted 0.3%.

Kenya surged to 7.5% economic growth in 2021 – above the 4% average recorded in sub-Saharan Africa. The World Bank has expected Moderation in this “remarkable recovery” in 2022. The average income economy is expected to grow by 5.2%.

Rising prices

The continuing effects of the pandemic and the war in Ukraine have made life difficult for ordinary citizens. This brought the state of the economy into focus in daily conversations.

High oil prices have led to inflation – too much money chasing too little goods. World Bank projects that crude oil and natural gas prices will rise by 81% in 2022. In June, the Kenya National Bureau of Statistics announced mentioned The country’s annual inflation rate has reached 7.9%.

This situation has particularly affected the poor. For example, file corn flour pricea staple in Kenyan households, rose from Shilling 150 to Sh200 between mid-May and June 2022. However, no salary or wage rose by 33% over a similar period to protect consumers’ purchasing power.

There are other factors driving inflation. Elections in Kenya expensive, which means that there is a lot of money in circulation. There is, too Stress On the imminent change of government, which reduces investor confidence and reduces production.

Furthermore, rains in Kenya were unreliable, which led to food shortages and subsequent price hikes.

The presidential candidates have noticed Voters are angry About the high cost of living, high public debt and corruption. They are looking to provide economic solutions with their data.

promises

Former Prime Minister Raila Odinga is Azemio One Kenya Flag bearer. The coalition promised to give a stipend of 6000 shillings (50 US dollars) per month to vulnerable families. The World Bank puts The poverty line At $57 a month. It is not clear how these vulnerable families will be selected or how long the stipend will be provided.

Kenya Kwanzaa – Coalition leads Vice President William Ruto for presidency – promises 50 billion Kenyan shillings (417 million US dollars) in credit available to “fraudsters”, the men and women at the bottom of the economic pyramid. He did not say how often this amount would be made available.

in kenya, 83% of employers In the informal sector, where “scammers” work. Opportunities for access to credit and job growth in this sector are limited. These “scammers” make up the majority of the country’s population 22 million votersHowever, many of them live Below the poverty line. World Bank Reports That 33.4% of Kenyans are poor.

Both sides are targeting land reforms. land ownership is emotional issue In Kenya it is marked by inequality that dates back to colonialism.

Both statements are inward-looking, focusing on domestic challenges and largely ignoring regional or international issues.

George Wajakoya from the Roots Party Launched To a large extent external statement, with China identified as the main source of export revenue. If elected president, Wajakoyah expects to sell parts of Asian hyenas, and meat of dogs and snakes. As the party wants cannabis certified To allow the export of the crop.

In addition, the party says it will deport unemployed foreigners, hang the corrupt, and shut down Standard rail And the implementation of four working days a week.

Roots’ economic ideas brightened the election campaign and captured the frustrations of ordinary Kenyans. During economic hardship, citizens are attracted to the extreme.

The Agano Party has the role of the flag bearer, David Wehiga. that it statement Looking in and out. While it calls for the return of the 20 trillion shillings ($169 billion) stashed abroad, it also plans to introduce tax breaks, corn subsidies and curb corruption.

Obstacles

All four statements promise to create economic opportunity and ease the suffering of ordinary Kenyans. But they should be more realistic.

First, Kenyans’ thinking will not change overnight. Corruption thrivesundermining economic growth.

Present budget deficit 8.1% of a country’s GDP – the value of what it produces in a year. The budget deficit increases the country’s need to borrow. The World Bank estimates that if the public debt gets 77% of GDP, more borrowing reduces growth. Kenya will not raise the money it needs to transform the economy if productivity does not rise as well.

Second, voting takes a day; Economic growth takes years. Whoever wins the election will need to pool resources, adopt new technologies, secure new markets, and transform citizens’ mindsets.

Third, politicians are constrained by the constitution, international obligations, special interests, and an ever-changing environment. Who predicted COVID-19 or the war in Ukraine?

Fourth, the data assumes that the government is the driver of the economy. The truth is that it is the citizens who do this through taxes. However, there is little emphasis on what individuals can do to advance themselves.

Fifth, the data is muted on deeply entrenched issues that gnaw at the economy, such as tribalism, grant-seeking culture and population growth despite limited resources such as land. These issues hinder the country’s productivity.

The four presidential candidates did not fully address the four factors of production: land, capital, labour, and entrepreneurship. Land was highlighted not as a factor of production, but for political reasons. Capital has received the least attention – where will it come from after debt and taxes? Azimio la Umoja and Kenya Kwanza mention improving employment through education, but fail to articulate the plan to make Kenyans more productive and entrepreneurial.

When the voting results are announced, the truth will come out. No jobs will be created overnight. Prices will not go down overnight. Voting is a sprint, and economic growth is a marathon.Conversation

About the author:

XN IrakiAssociate Professor, College of Business and Management Sciences, University of Nairobi

This article has been republished from Conversation Under a Creative Commons License. Read the original article.


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