Kenya’s war against Somali’s al-Shabaab will cost billions of shillings and cause fresh shocks in the country’s struggling economy with a big impact on growth, analysts have warned.
The nature of risks involved in fighting the shadowy terrorist group became clear on Sunday when a military helicopter crashed near the Somalia border, killing all the five crew on board and wiping out equipment worth millions of shillings. (Also read: Al Shabaab warns Kenyan soldiers)
The Chinese-made z9 attack helicopter is just one of the high-value equipment, including amoured cars and tanks, that Nairobi unleashed on al-Shabaab following last week’s abduction of Spanish aid workers at a refugee camp in northern Kenya.
War experts said deployment of heavy artillery and hundreds of personnel in the rough terrain of Somalia — which is currently experiencing heavy rains — could raise the cost of war by large margins especially if the engagement runs deep into next year.
“The amoured vehicles and tanks are guzzlers that can consume up to 10,000 litres of fuel per day, running into thousands of shillings at the current fuel prices,” said Andrew Franklin, a retired US marine who works in Nairobi as a financial consultant.
“The cost will be much higher should some of the machinery get stuck in the mud and make it difficult for the troops to move freely in the battlefront.”
It is estimated that it will cost taxpayers Sh7,000 to keep each soldier in the battlefield everyday, adding up to more than Sh200,000 a month. The amount includes the cost of moving the troops, supplying them with food and water, communication and medical care.
The number of troops Kenya has sent to the border is not known but at the price of Sh7,000 per day for every soldier, the country must spend Sh210 million per month or a Sh1 billion every six months to keep 1,000 soldiers in the battlefield.
War remains a costly affair, whose impact on the economies of warring countries has been far-reaching.
The US is, for instance, estimated to have spent more than a trillion dollars in the Iraq and Afghanistan wars that have been partly blamed for the troubles in the world’s largest economy.
Kenya’s war on al-Shabaab comes three months after the Treasury increased the Ministry of Defence’s budget by nearly Sh7 billion.
The amount is provided for in the revised budget under ‘‘current grants to government agencies and other levels of government’’ and was the largest single-item change.
The revision pushed the military’s total budget to Sh51.3 billion besides the Sh13 billion allocated to the National Security Intelligence Service that survived MPs bid to shave off Sh3 billion.
The full economic impact of the war remains hard to gauge as the extent and duration of military engagement is unknown.
It, however, started after the Kenya National Bureau of Statistics revealed that growth slowed down to 4.1 per cent in the third quarter of the year from 4.5 in the second quarter – setting the country up for an expansion rate that is less than the 5.6 per cent earlier projected.
“We also expect GDP growth in fourth quarter to decline to 3.0-3.8 per cent as the take up of credit slows down with the ongoing rise in interest rates,” says a note by Vimal Parmar, an analyst at Kestrel Capital.
While acknowledging that Kenya will pay a heavy price for the war in Somalia, University of Nairobi lecturer Gerishon Ikiara maintained that firm action is needed against Al Shabaab is necessary even if it means sacrificing growth in the short-term because their activities risked stalling the economy anyway.
“War is a huge burden on any economy that often leads to an increase in the deficit and a reduction of expenditure in key sectors such agriculture and education but no country can sit and watch its integrity violated as Al Shabaab has done to Kenya in the past couple of months,” he said.
Kenya is grappling with a budget deficit of Sh236 billion after Finance minister Uhuru Kenyatta read a Sh1.2 trillion Budget in June.
Last week, Mr Kenyatta said ministries would be required to cut spending as part of measures to ease pressure on the shilling and the cost of living — a move that has been rendered more urgent by the campaign against al-Shabaab.
Increased war spending, possibly entailing printing of money normally comes with the risk of higher inflation.
With inflation already at 17.32 per cent, any further rise in the cost of living could have serious ramifications for the government, especially in the run up to next year’s general election.
Dr Gerishon Ikiara agrees there is a downside to the incursion but points out that action was needed to stop al-Shabaab from acting with impunity.”
The full cost of the war is expected to be made public when the Treasury tables the supplementary budget estimates in Parliament early next year.
The war in Somalia is Kenya’s first since independence, making it a test case for a country that has only seen war in neighbouring states.
Tanzania was the first East African state to go to war after independence with the October 1978 invasion of Idi Amin’s Uganda
Tanzanian troops quickly ousted Amin leading to a settlement that saw Uganda pay their Southern neighbour $123 million (Sh12.3 billion at the current exchange rate).
Some analysts said Kenya could escape financing the full cost of the war with the help of Western allies such as the US, which has maintained a big presence in the region for strategic reasons.
Kenya’s tourism industry, which is one of the country’s key forex earners, is among segments of the economy that has been hit hard by the activities of the Somali militia.
Confidence in the sector has plummeted since August when suspected al-Shabaab killed a tourist and abducted his wife before capping it up with the abduction of another French tourist in September.
The Islamist terror group has uncharacteristically failed to claim responsibility and has insisted it was not involved.But the militant group on Monday warned of terror attacks on Kenya if the troops are not withdrawn.
“Tourism is always sensitive whether internal or external.
The war will affect the industry as those wanting to come for holidays may stay away,” said former Tourist Trust Fund boss Dan Kaggagi.
However, he added that an aggressive marketing campaign could quickly turn around fortunes giving the example of Egypt that has waded through terrorism and successfully defended its tourism industry.