Outcome of vote key to economic stability

As far as investor sentiments go, Wednesday's vote on the proposed Constitution can only be said to have had a positive impact.

In recent weeks as the country moved closer to the historic vote, the economy’s radar screen has been showing very positive signs.

In the key banking sector, for instance, all players expect to grow their lending business in the remaining part of the year with 41 per cent saying they expect the credit market to expand by more than 10 per cent, according to the Central Bank of Kenya.

Optimism is equally rising in the private sector where 60 per cent of firms expect demand for credit to increase in the remainder of 2010 relative to May 2010.

That should be good news first because this segment of the economy accounts of fraction of the credit market whose borrowing directly impacts on the economy.

This time round, this group, which includes manufacturers of consumer goods, producers of construction material and service providers estimate that they will need additional financing to expand their activities and to take advantage of the prevailing low interest rates to refinance old loans.

Borrowing to finance expansion is particularly important because one must only infer that it a deliberate decision that is informed by foresight into what consumer demand is likely to be in the next few months.

Positive sentiments in the economy were even stronger on Tuesday -- the eve of the plebiscite – when activity at the Nairobi Stock Exchange, a key barometer of the economy rose significantly pushing the market capitalisation further above the one trillion mark as investors shrugged off earlier concerns over the outcome of the vote.

Kenya’s currency, the shilling, which has been losing ground to the world’s major currencies for reasons that are mainly external, held its forte firming slightly against the US dollar and the euro.

All these outcomes indicate that most investors and consumers have lowered their rating of the risk associated with the constitutional vote and are confident of the country remaining stable in the short term clearing the way for them to take positions in whatever segment of the economy they belong.

Most important is the fact that these sentiments are, in the medium term, a critical part of what drives growth in an economy signalling that their persistence key to realising the 4.5 per cent target that has been set for this year.

Coming in August, a peaceful and conclusive end to the constitution vote offers Kenya the opportunity to race to a good finish in task of advancing our social and economic welfare as a people that is only possible with strong growth.

It is, however, important to remember that voting for or against the constitution is merely an event.

Living in whatever constitutional dispensation that emerges thereafter, however what will determine our fate in the long term.