Poor business environment and non-tariff barriers to trade are hampering growth in Kenya despite improvements in the policy framework last year, the World Bank has said.
In its new Country Policy and Institutional Assessment (CPIA) report released Wednesday the bank said that restricted property rights were another drawback.
“The challenge for Kenya is to improve on other critical areas including the business regulatory environment and governance, which have led to missed opportunities for Kenya’s economic transformation and its progress towards middle income status,” said World Bank country director for Kenya Diarietou Gaye.
However, Kenya shared the top position with a score of 3.9 (of a possible six) with Cape Verde among the 39 sub-Saharan Africa countries funded under the bank’s concessionary lending arm, the International Development Association (IDA).
“The CPIA shows that Kenya’s overall economic environment has improved over the past three years due to better economic management and proactive policies that increase opportunities for Kenyans to enjoy higher growth with equity,” said Ms Gaye.
The higher assessment was based on improvements in the management of monetary, exchange rate, fiscal and debt policies and will enable Kenya to borrow more from IDA. In 2011, Kenya had a score of 3.8.
The scores are likely to be better if Kenya improves its policies on trade and business regulation as well as on governance issues.
“Creating and expanding safety nets improves the score. Governance has also lagged behind in SSA countries. Economic management has improved a lot as the countries tried to get away from the mismanagement of the 1980s and 1990s,” said bank’s acting chief economist for Africa Punam Chuhan-Pole.
As a way to increase the safety net, Treasury Secretary Henry Rotich has proposed to double the number of households benefiting from cash transfers from 151,000 to 300,000 in the 2013/14 national Budget. The targeted households are those with orphans and other vulnerable children, the elderly and persons with disabilities.
The CPIA score is based on 16 key development indicators covering four areas economic management, structural reforms, policies for social inclusion and equity, and public sector management and institutions.
Relative to 2007, the CPIA score for Kenya has improved by 0.3 points. However, there has been no change on the score for structural policies over those years.
Economic secretary to the National Treasury Geoffrey Mwau said Kenya was reforming operations at Mombasa port and had also agreed with the other countries in the region to remove non-tariff barriers.