Increased debt, lower income, a slowdown in corporate capital spending, the delay of regulatory decisions, and diminished lending activity typically mark election years in Kenya.
- Economists and humanitarian crisis specialists have interpreted the rising cost of living in terms of increasing demand for limited goods and weak buying power.
- The best way for Kenya to improve its current economy is to focus on increasing agricultural production.
- The future administration must establish legislation supporting political stability and social harmony to unleash industrial sector development.
The cost of living and economic vulnerability
In recent years, the cost of living in Kenya has risen. Economists and humanitarian crisis specialists have interpreted this in terms of increasing demand for limited goods and weak buying power. These effects stem from, among other things, the Russia-Ukraine conflict, a poor post-COVID-19 recovery, climate change, a more fragile economy, and rampant government spending.
Regardless, public opinion on the increase is mixed, and there is a widespread understanding that the majority of the population is struggling to satisfy their necessities. Unsurprisingly, the economy was a prominent campaign theme and a core pillar of the manifestos of the political elites.
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So far, and in light of the KES 20.6 billion apportioned to the economic stimulus program in 2022/2023 budget and USD 4 million in UN-donated emergency funds, presidential candidates proposed three different approaches to boosting Kenya’s economy, focusing on either: two sectors; small, informal businesses (‘hustlers’); or several sectors (multisector).
The verdict is still out on which economic solution is best. However, the verdict will be well received in the election’s immediate aftermath. Long-term, to choose the method with the most significant potential to stimulate and build the country’s economy and rapidly and sustainably elevate Kenya’s “bottom millions” out of poverty. Without this, Kenya’s economy would remain exposed to environmental and political shocks, worsening an already dire situation.
GDP growth drops, and debt burdens
Increased debt, lower income, a slowdown in corporate capital spending, the delay of regulatory decisions, and diminished lending activity typically mark election years in Kenya. This trend is anticipated to continue with the 2022 elections, with baseline impacts and the pandemic exacerbating the decline.
Kenya’s GDP growth rates in 2002, 2008, 2013, and 2017 were 0.2 percent, 0.5 percent, 3.8%, and 4.8%, respectively. As measured by gross domestic product (GDP), the economy will most likely rise by 5% in 2022.
Although it is a considerable decrease from last year’s, about 8 per cent, it will be the quickest in an election year since the previous single-party presidential elections in 1988. However, the economy is significantly in debt due to massive infrastructure investment in the last eight years.
Businesses have postponed critical decisions in past election years because a change in administration may result in a shift in priorities. Bank lending reduces when economic activity slows and political campaign expenditure falls. The expected slowdown in economic activity as firms postpone investment choices would impact Kenya’s economic development.
Factors in agricultural production
Food security is a national disaster right now. So, the best way for Kenya to improve its current economy is to focus on increasing agricultural production. There are two main reasons for this. First, most Kenyans make a living by growing or selling crops, seeds, farming tools, fertilizer, and other products related to agriculture (land, for example).
Second, if food production goes up, there will probably be more and different kinds of food available. The rise in production would make it easier to get food and reduce food insecurity. Food security would then make things better for millions of people in Kenya.
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Raising income and working towards food security
Kenya’s economic growth may be accelerated and strengthened by making specific changes to the ways offered by the presidential candidates, combining components of the proposed models, or developing a new one altogether. Citizens, for example, may use their constitutional rights to demand an entirely new, people-driven, class-transcending paradigm.
A program like this would solve food hunger and sustain revenue generating simultaneously in an inclusive, innovative, and risk-free way. The new administration should broaden the tax base beyond the overburdened middle class to include low and high-income people whose tax contribution does not match their disproportionately high income.
This removal of tax prejudices should get complimented by reducing unnecessary government expenditure and corruption. The cash gathered should feed needy Kenyans and enhance the country’s food reserves by upgrading land tenure structures, rules, and practices to allow for mass food production and trade.
As hunger decreases and income levels stable or rise, the government may reconsider agriculture by experimenting with high-value, low-input crops and animals. This should occur on a progressive trial basis after extensive public-private sector dialogues and Kenyan involvement. Finally, Kenyans want to be a part of a developing, non-repressive economy. There is still an opportunity for further long-term economic recovery discussions. These debates must continue beyond the general election.
The inflationary pressures
Nonetheless, elections will be a burden on Kenya’s economic progress. This year’s election will be accompanied by exceptional living circumstances, which will significantly influence the macroeconomic situation. Kenya has had a stable environment for the previous five years. However, the financial markets’ performance will be affected since they are influenced mainly by investor mood beyond elections.
The economic impacts of the Covid -19 pandemic, debt load, food scarcity owing to low rainfall, and high commodity prices would almost certainly result in a dramatic increase in the inflation rate.
During the last general election in 2017, the inflation rate skyrocketed owing to a dramatic spike in food costs caused by the drought. This year, current geopolitics continue to impact the country’s cost of living.
The prices of fuel and gas
Kenya is one of several nations feeling the economic heat from Ukraine’s deepening crisis. The crisis has further affected the global supply chain. When Russia invaded Ukraine on February 24, global crude oil prices skyrocketed to a nearly 14-year high of $140 per barrel.
Kenyan motorists, industry, and families all felt the effects as fuel and diesel prices have risen in recent months. A litre of fuel currently costs Sh157.57 on average in Nairobi, while diesel costs Sh138.47 at the pump. Kerosene, used for cooking and lighting in low-income families, is currently Sh126.41 per litre.
Trends suggest Kenya has outstanding resilience due to the quick bounce seen after the last election. Analysts believe the future leader must actively concentrate on transformation to allow the coupling of infrastructure investments to overall sustainability.
The future administration must establish legislation supporting political stability and social harmony to unleash industrial sector development. The adjustments will generate jobs, attract international investors, and lessen import dependency.
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