Economy—overview: Since 1993, the government of Kenya has implemented a program of economic liberalization and reform. Steps have included the removal of import licensing and price controls, removal of foreign exchange controls, fiscal and monetary restraint, and reduction of the public sector through privatizing publicly owned companies and downsizing the civil service. With the support of the World Bank, IMF, and other donors, these reforms have led to a turnaround in economic performance following a period of negative growth in the early 1990s. Kenya's real GDP grew at 5% in 1995 and 4% in 1996, and inflation remained under control. Growth slowed in 1997. Political violence damaged the tourist industry, and the IMF allowed Kenya's Enhanced Structural Adjustment Program to lapse due to the government's failure to enact reform conditions and to adequately address public sector corruption. Moreover, El Nino rains destroyed crops and damaged an already crumbling infrastructure in 1997 and on into 1998. Long-term barriers to development include electricity shortages, the government's continued and inefficient dominance of key sectors, endemic corruption, and the country's high population growth rate.
GDP: purchasing power parity—$45.3 billion (1997 est.)
GDP—real growth rate: 2.9% (1997 est.)
GDP—per capita: purchasing power parity—$1,600 (1997 est.)
GDP—composition by sector:
agriculture: 27%
industry: 20%
services: 53% (1995)
Inflation rate—consumer price index: 8.8% (1996)
Labor force:
total: 8.78 million (1993 est.)
by occupation: agriculture 75%-80%, non-agriculture 20%-25%
Unemployment rate: 35% urban (1994 est.)
Budget:
revenues: $3 billion
expenditures: $3 billion, including capital expenditures of $638 million
(FY96/97 est.)
Industries: small-scale consumer goods (plastic, furniture, batteries, textiles, soap, cigarettes, flour), processing agricultural products; oil refining, cement; tourism
Industrial production growth rate: 3.8% (1995)
Electricity—capacity: 808,000 kW (1995)
Electricity—production: 3.59 billion kWh (1995)
Electricity—consumption per capita: 134 kWh (1995)
Agriculture—products: coffee, tea, corn, wheat, sugarcane, fruit, vegetables; dairy products, beef, pork, poultry, eggs
Exports:
total value: $2.1 billion (f.o.b., 1996)
commodities: tea 18%, coffee 15%, petroleum products (1995)
partners: Uganda 22.8%, UK 20.1%, Tanzania 19.1%, Germany 14.0%, Netherlands
7.6%, US 6.1%
Imports:
total value: $2.9 billion (f.o.b., 1996)
commodities: machinery and transportation equipment 31%, consumer goods
13%, petroleum products 12% (1995)
partners: UK 21.3%, UAE 18%, Japan 14%, Germany, US
Debt—external: $7 billion (1994 est.)
Economic aid: NA
Currency: 1 Kenyan shilling (KSh) = 100 cents
Exchange rates: Kenyan shillings (KSh) per US$1—61.164 (January 1998), 58.732 (1997), 57.115 (1996), 51.430 (1995), 56.051 (1994), 58.001 (1993)
Fiscal year: 1 July—30 June
Kenya's manufacturing sector suffers from the consequences of earlier policy decisions. The initial and rapid growth of industrial production in Kenya was based on investment in import substitution, often by multi- national companies, protected by extensive quantitative import barriers against competition. As a result, manufacturing firms now tend to be non- competitive.
Following a recessionary slump in the mid- 1980s, the government launched a wide-ranging structural adjustment program designed to attain real-per- capita income growth. With external donors' cooperation in the form of greatly increased assistance flows from external donors, the government committed itself to major economic policy changes, including price decontrols, privatization, parastatal reform, and reduction of government budget deficits.
In addition, an import liberalization scheme was established, agricultural prices were made somewhat more responsive to market demand, and the private sector was given a bigger role in marketing agricultural products. Export processing zones were established and exporters awarded better incentives. In principle, the government agreed to limit the public sector deficit and net borrowing from the banking sector, but it failed either to curb the rising budget deficit or implement many reforms.
By mid-1991, the growth rate in agricultural production was 3.4%, manufacturing was stagnating, and tourism--the major source of foreign exchange earnings--was in a slump induced by the Gulf war. The rate of capital accumulation was declining, inflation was skyrocketing (25%-30%), and the government deficit was up to 6.7% of GDP.
In November 1991, assistance donors agreed to suspend all programs and cash assistance pending evidence of active reform measures. Primary areas of concern continue to be decreasing the growing budget deficit, scaling back the civil service, and privatizing some of the most wasteful parastatals corporations.
Nairobi continues to be a major hub in East Africa with the region's best transportation linkages, communications infrastructure, and trained personnel. Thus, it is still a desirable place for foreign firms to maintain branch and representative offices, although many companies find it difficult to transfer out dividends.