Kenya’s success in becoming a middle-income country hangs on the nation’s ability to grow its exports and decrease poverty, the World Bank economists said Monday. Exporting more would help the country to effectively deal with the fiscal and monetary challenges it has faced in the past 10 years as it reduces the current reliance on domestic consumption as a major driver of growth, the economists said even as they forecast a 5.7 per cent growth this year. For Kenya to grow beyond five per cent, it needs to enhance the contribution of exports as an engine of growth which is now dominated by consumption. Today, net exports are a drag on growth, having reduced overall growth by 4.1 per cent in 2012 — and as reflected in a large and widening current account deficit,” the bank said in its eighth edition of the Kenya economic update report. The bank estimates that if Kenya was to balance its external position (that is, matching imports with exports while maintaining current levels of consumption and investments) its overall growth would stand at eight per cent — only two percentage points shy of the 10 per cent target. The World Bank economists also placed reducing inequality at the centre of Kenya’s progression to a middle-income country status saying an increase in targeted cash transfers and other public funds to poor households would increase the speed of poverty reduction and speed up growth. The bank estimates that the rate of poverty dropped from 47 per cent in 2005 to about 38 per cent currently. That estimate is hinged on the assumption that economic growth improved but the country’s high level of inequality stayed the same since the last household survey was done in 2005. The World Bank said the speed of poverty reduction could improve from the one percentage point per year to two percentage points with the roll-out of policies that reduce inequality as has happened in Uganda and Rwanda. Cutting poverty levels at the rate of two percentage points per year would enable Kenya to reduce the number of poor people to almost zero by 2030, the report says. For Kenya, the urgency in reducing the inequality gap lies in recent findings showing that a child is 30 per cent more likely to survive to age five in Rwanda, Ghana and Nepal than in Kenya — which has higher per capita income but poor distribution of the same among citizens. If there is no change in inequality, economic growth will only yield a one-percentage point reduction in poverty annually as has happened in the past 20 years, the World Bank said.
Posted on: Tue, 18 Jun 2013 06:09:51 +0000
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