Economy of 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 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.

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, Kenya needed further reforms, particularly in governance, in order to increase GDP growth and combat poverty among the majority of its population.

The Government of Kenya took some positive steps on reform, including the 1999 establishment of the Kenyan Anti-Corruption Authority, and measures to imporve the transparency of government procurements and reduce the government payroll. In July 2000, the IMF signed a $150 million Poverty Reduction and Growth Facility, and the World Bank followed suit shortly after with a $157 million Economic and Public Sector Reform credit. By early 2001, however, the pace of reform appeared to be slowing again, and the IMF and World Bank programs were in abeyance as the government failed to meet its commitments under the programs.

Nairobi continues to be the primary hub of East Africa. It enjoys the region's best transportation linkages, communications infrastructure, and trained personnel. 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 Cooperation (EAC). The EAC's objectives include harmonizing tariffs and customs regimes, free movement of people, and improving regional infrastructures.

GDP: purchasing power parity - $45.1 billion (1999 est.)

GDP - real growth rate: 1.5% (1999 est.)

GDP - per capita: purchasing power parity - $1,600 (1999 est.)

GDP - composition by sector:
agriculture: 26%
industry: 18%
services: 56% (1999 est.)

Population below poverty line: 42% (1992 est.)

Household income or consumption by percentage share:
lowest 10%: 1.2%
highest 10%: 47.7% (1992)

Inflation rate (consumer prices): 6% (1999 est.)

Labor force: 9.2 million (1998 est.)

Labor force - by occupation: agriculture 75%-80%

Unemployment rate: 50% (1998 est.)

Budget:
revenues: $2.91 billion
expenditures: $2.97 billion, including capital expenditures of $NA (2000 est.)

Industries: small-scale consumer goods (plastic, furniture, batteries, textiles, soap, cigarettes, flour), agricultural products processing; oil refining, cement; tourism

Industrial production growth rate: 1% (1999 est.)

Electricity - production: 4.23 billion kWh (1998)

Electricity - production by source:
fossil fuel: 8.27%
hydro: 82.74%
nuclear: 0%
other: 8.99% (1998)

Electricity - consumption: 4.078 billion kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 144 million kWh (1998)

Agriculture - products: coffee, tea, corn, wheat, sugarcane, fruit, vegetables; dairy products, beef, pork, poultry, eggs

Exports: $2.2 billion (f.o.b., 1999 est.)

Exports - commodities: tea, coffee, horticultural products, petroleum products (1995)

Exports - partners: Uganda 16%, UK 13%, Tanzania 13%, Egypt 5%, Germany 5% (1998)

Imports: $3.3 billion (f.o.b., 1999 est.)

Imports - commodities: machinery and transportation equipment, petroleum products, iron and steel

Imports - partners: UK 12%, UAE 9%, US 8%, Japan 8%, Germany 6%, India 4% (1998)

Debt - external: $6.5 billion (1998)

Economic aid - recipient: $457 million (1997)

Currency: 1 Kenyan shilling (KSh) = 100 cents

Exchange rates: Kenyan shillings (KSh) per US$1 - 73.943 (December 1999), 70.326 (1999), 60.367 (1998), 58.732 (1997), 57.115 (1996), 51.430 (1995)

Fiscal year: 1 July - 30 June

See also : Kenya