Times Tower,
headquarters for the Kenya Revenue Authority and the tallest building in East
Africa, located in Nairobi, Kenya.
After independence, Kenya
promoted rapid economic growth through public investment, encouragement of
smallholder agricultural production, and incentives for private (often foreign)
industrial investment. Gross domestic product (GDP) grew at an annual average
of 6.6% from 1963 to 1973. Agricultural production grew by 4.7% annually during
the same period, stimulated by redistributing estates, diffusing new crop strains,
and opening new areas to cultivation.
Between 1974 and 1990,
however, Kenya's economic performance declined. Inappropriate agricultural
policies, inadequate credit, and poor international terms of trade contributed
to the decline in agriculture. Kenya's inward-looking policy of import
substitution and rising oil prices made Kenya's manufacturing sector
uncompetitive. The government began a massive intrusion in the private sector. Lack
of export incentives, tight import controls, and foreign exchange controls made
the domestic environment for investment even less attractive.
From 1991 to 1993, Kenya
had its worst economic performance since independence. Growth in GDP stagnated,
and agricultural production shrank at an annual rate of 3.9%. Inflation reached
a record 100% in August 1993, and the government's budget deficit was over 10%
of GDP. As a result of these combined problems, bilateral and multilateral
donors suspended program aid to Kenya in 1991.
In 1993, the Government of
Kenya began a major program of economic reform and liberalization. A new
minister of finance and a new governor of the Central Bank of Kenya undertook a
series of economic measures with the assistance of the World Bank and the International
Monetary Fund (IMF). As part of this program, the government eliminated price
controls and import licensing, removed foreign exchange controls, privatized a
range of publicly owned companies, reduced the number of civil servants, and
introduced conservative fiscal and monetary policies. From 1994-96, Kenya's
real GDP growth rate averaged just over 4% a year.
In 1997, however, the
economy entered a period of slowing or stagnant growth, due in part to adverse
weather conditions and reduced economic activity prior to general elections in
December 1997. In 2000, GDP growth was negative, but improved slightly in 2001
as rainfall returned closer to normal levels. Economic growth continued to
improve slightly in 2002 and reached 1.4% in 2003; it was 4.3% in 2004 and 5.8%
in 2005.
In July 1997, the
Government of Kenya refused to meet commitments made earlier to the IMF on
governance reforms. As a result, the IMF suspended lending for 3 years, and the
World Bank also put a $90-million structural adjustment credit on hold. Although
many economic reforms put in place in 1993-94 remained, conservative economists
believe that Kenya needs further reforms, particularly in governance, in order
to increase GDP growth and combat the poverty that afflicts more than 57% of
its population.
The Government of Kenya
took some positive steps on reform, including the 1999 establishment of the Kenya
Anti-Corruption Authority (KACA), and measures to improve the transparency of
government procurements and reduce the government payroll. In July 2000, the
IMF signed a $150 million Poverty Reduction and Growth Facility (PRGF), and the
World Bank followed suit shortly after with a $157 million Economic and Public
Sector Reform credit. The Anti-Corruption Authority was declared
unconstitutional in December 2000, and other parts of the reform effort
faltered in 2001. The IMF and World Bank again suspended their programs. Various
efforts to restart the program through mid-2002 were unsuccessful.
Under the leadership of
President Kibaki, who took over on December 30, 2002, the Government of Kenya
began an ambitious economic reform program and has resumed its cooperation with
the World Bank and the IMF. The new National Rainbow Coalition (NARC)
government enacted the Anti-Corruption and Economic Crimes Act and Public
Officers Ethics Act in May 2003 aimed at fighting graft in public offices. Other
reforms especially in the judiciary, public procurement etc., have led to the
unlocking of donor aid and a renewed hope at economic revival. In November
2003, following the adoption of key anti-corruption laws and other reforms by
the new government, donors reengaged as the IMF approved a three-year $250
million Poverty Reduction and Growth Facility and donors committed $4.2 billion
in support over 4 years. The renewal of donor involvement has provided a
much-needed boost to investor confidence.
However, the government’s
ability to stimulate economic demand through fiscal and monetary policy remains
fairly limited while the pace at which the government is pursuing reforms in
other key areas remains slow. The Privatization Bill is yet to be enacted and
civil service reform has been limited despite the government’s assertion that
reforms would be undertaken. The main challenges include building consensus
within the loosely bound NARC government, taking candid action on corruption,
enacting anti-terrorism and money laundering laws, bridging budget deficits,
rehabilitating and building infrastructure, maintaining sound macroeconomic
policies, and addressing structural reforms needed to reverse slow economic
growth.
Nairobi continues to be the
primary communication and financial hub of East Africa. It enjoys the region's
best transportation linkages, communications infrastructure, and trained
personnel, although these advantages are less prominent than in past years. A
wide range of foreign firms maintain regional branch or representative offices
in the city. In March 1996, the Presidents of Kenya, Tanzania, and Uganda
re-established the East African Community (EAC). The EAC's objectives include
harmonizing tariffs and customs regimes, free movement of people, and improving
regional infrastructures. In March 2004, the three East African countries
signed a Customs Union Agreement.
Economic
summary |
|
GDP |
$12.7 billion (2003) |
Annual growth rate |
5.8% (2005) |
Per capita income |
$371 |
Natural resources |
Wildlife, land (5% arable) |
Agricultural produce |
tea, coffee, sugarcane, horticultural products, corn, wheat, rice, sisal,
pineapples, pyrethrum, dairy products, meat and meat products, hides, skins |
Industry |
petroleum products, grain and sugar milling, cement, beer, soft
drinks, textiles, vehicle assembly, paper and light manufacturing, tourism |
Trade
in 2002 |
||
Exports |
$2.2 billion |
tea, coffee, horticultural products, petroleum products, cement,
pyrethrum, soda ash, sisal, hides and skins, fluorspar |
Major markets |
Uganda, Tanzania, United Kingdom, Germany, Netherlands, Ethiopia, Rwanda,
Egypt, South Africa, United States |
|
Imports |
$3.2 billion |
machinery, vehicles, crude petroleum, iron and steel, resins and
plastic materials, refined petroleum products, pharmaceuticals, paper and
paper products, fertilizers, wheat |
Major suppliers |
United Kingdom, Japan, South Africa, Germany, United Arab Emirates, Italy,
India, France, United States, Saudi Arabia |
Early in 2006, Chinese
President Hu Jintao signed an oil exploration contract with Kenya; the latest
in a series of deals designed to keep Africa's natural resources flowing to
China's booming economy.
The deal allowed for China's
state-controlled offshore oil and gas company, CNOOC Ltd., to prospect for oil
in Kenya, which is just beginning to drill its first exploratory wells on the
borders of Sudan and Somalia and in coastal waters. No oil has been produced
yet, and there has been no formal estimate of the possible reserves.
Ethnicity
and languages in Kenya.
Kenya is a country of great
ethnic diversity. Tension between the various groups accounts for many of
Kenya's problems. During the early 1990s, politically instigated tribal clashes
killed thousands and left tens of thousands homeless. The KANU regime at the
time headed by former President Daniel Toroitich arap Moi was blamed for
instigating the violence as a way of discouraging multiparty politics and
clinging to power.[citation needed] Ethnically split
opposition groups allowed the regime of Daniel arap Moi, in power from 1978
until 2002, to be re-elected for four terms, with the election in 1997 being
marred by violence and fraud.
Ethnic
groups
Gĩkũyũ 22%, Luhya 14%, Luo 13%, Kalenjin
12%, Kamba 11%, Kisii 6%, Ameru 6%, Somali 3%, other African (including Swahili
people, Pokomo, Giriama, Rabai, Duruma, Chonyi, Digo, Kauma, Taita, Meru,
Turkana, Orma, Wasanye, Wanyoyaya, Borana, Rendille, El Moran, Malakote, Embu,
Teso, Gabra, Ndorobo, Maasai) 12%, non-African (Asian/Desi, European, and Arab)
1%.
Religious
affiliation
Various Protestant 45%, Roman Catholic 33%, Muslim
10%, Traditional Religions 10%. Others include Hinduism, Jainism & the Bahá'í
Faith.
Largest
cities
Nairobi, Mombasa, Kisumu, Nakuru and Eldoret.
See also: List of cities in Kenya