Kibaki unveils Sh40b economic recovery plan

The Government is rolling out a multi-billion public expenditure plan it hopes will pull the economy out of its deepest plunge in 20 years, restore food security and reduce inflationary pressure that has cut consumer purchasing power by nearly one third in the past 15 months.

The Sh40 billion plan, whose details President Kibaki unveiled on Monday in his Madaraka Day speech, will see the government spend close to Sh20 billion on infrastructure projects contained in Phase One of the economic blueprint Vision 2030, support agriculture and establish special economic zones to boost the country’s export earnings.

The plan, which some analysts referred to as the roadmap to recovery, won praise for its head-on approach to tackling some of Kenya’s most outstanding challenges such as economic slowdown, mass unemployment and political reforms that are critical to the country’s long term stability.

“We are making strategic interventions in all sectors with a view to accelerating economic growth, employment creation as well as elimination of absolute poverty,” the President said.

He unveiled an agriculture Marshall Plan that will see the government spend more than Sh15 billion to boost crop and animal production through revival of the country’s irrigation schemes and the digging of water pans in arid and semi-arid regions that produce nearly 70 per cent of Kenya’s beef products.

Increased agricultural productivity is seen as critical to the realisation of Kenya’s development agenda by ensuring food security at home and saving the billions of shillings the country is spending on food imports.

Food security should also offer policy makers the space they need to tackle runaway inflation that stood at an average of 26 per cent last year – driven by high food and energy prices.

President Kibaki said the government would in the short- term spend Sh9.7 billion to import fertilisers – the highest in the country’s history – to speed up a return to the 2007 output levels.

The President said the government would invest heavily in new irrigation schemes and the rehabilitation of existing ones such as Ahero, Mwea, Hola, Bura, Perkerra and Wei Wei to end Kenya’s vulnerability to weather changes.

The reliance on rain-fed agriculture has been singled out as the biggest obstacle to Kenya’s realisation of food security 46 years after independence.

The President said poor rainfall had undermined the country’s ability to boost its agricultural output and extended by six months the duty-free maize importation window it opened last year at the onset of a raging famine facing an estimated 10 million people.

Kenya National Bureau of Statistics data indicates that high food prices have been the main drivers of inflation in the country forcing policy makers to rethink the development priorities.

Inflation rose to 26.1 per cent in April up from 25.8 per cent in March pushed by an acute food shortage that has left millions of Kenyans starving.

Food and drinks, which is the dominant segment of the Consumer Price Index basket — a measure of the average price of consumer goods and services purchased by households — rose by the highest margin, making it a food-driven inflation.

The Central Bank reckons that a decline in food prices and an easing of inflationary pressure is largely dependent on the rainfall patterns and availability of maize imports to bridge the shortfall in domestic production.