The Kenya Economic Survey 2024 Report, released earlier this month, reveals a mixed performance that may be classified into three areas: growth, challenges, and prospects. One of the primary sectors suggested for economic growth is exports to the East African Community (EAC) bloc. Regional trade partnerships have the potential to boost intra-regional trade growth.
Diversifying export items and markets will help Kenya lessen its dependency on specific commodities and strengthen its export sector.
However, Kenya made significant gains in several areas, including exports, regional trade, and the current account balance, indicating encouraging developments.
The current account balance increased by 13.1 percent in 2022 and is expected to rise further in 2023, boosted by stronger horticulture and tea exports. Kenya predominantly exported to the African continent, with major contributions from the EAC bloc, underscoring the Africa Continental Free Trade Area’s (AfCFTA) potential for African economic development.
However, there was a rise in imports, partly due to increased wheat and rice imports. In 2023, international trade showed a variety of trends, with export earnings rising in places like Africa, Asia, and the European Union because of higher exports of tea and other goods. Conversely, export earnings from the Russian Federation notably declined. Areas of challenges identified by the Economic Survey include fluctuations in international trade, which can impact export earnings and overall economic stability.
The currency depreciation against major trading partners also poses a challenge, further affecting export competitiveness and potentially leading to higher import costs.
Changes in export earnings, such as declines from specific countries like the Russian Federation, highlight vulnerabilities in the export sector. And an increase in imports, particularly of commodities like wheat and rice, indicates a level of import dependency that could impact the trade balance and foreign exchange reserves.
The survey highlights both significant progress and pressing challenges. While positive developments in exports, regional trade, and key sectors like education, health, and infrastructure signal growth potential, issues such as trade fluctuations, currency depreciation, and import dependency pose threats to economic stability.
In the education sector, there is a notable increase in total expenditure, indicating a strong commitment to investing in human capital development. This rise in government spending underscores a focus on improving educational outcomes and expanding access to quality education, essential for nurturing a skilled workforce and driving long-term economic growth.
Similarly, the health sector is experiencing a substantial increase in government expenditure, reflecting a prioritisation of healthcare services and infrastructure. This heightened investment signals a dedication to enhancing healthcare access, quality, and outcomes for the population.
By investing in the health sector, Kenya aims to promote public health, reduce the burden of disease, and improve overall well-being, crucial elements for sustainable development.
Infrastructure development plays a pivotal role in economic growth and enhances the quality of life for citizens.
Investments in infrastructure such as roads, bridges, and energy facilities are crucial for improving connectivity, facilitating trade, and attracting investments. The infrastructure not only boosts productivity and reduces transportation costs but also stimulates economic activities across various sectors, fostering inclusive growth and development.
To support sustainable development and inclusive growth in Kenya, the survey made specific recommendations. Firstly, promote export diversification, which is crucial in reducing dependency on specific products and markets. Thereby enhancing economic resilience and sustainability.
Enhancing trade policies to facilitate export growth, manage currency fluctuations, and create a favourable trade environment can foster inclusive economic development.
The survey emphasises the need for targeted policies to diversify exports, strengthen regional trade partnerships, invest in value-added industries, and support small businesses. Furthermore, investing in sustainable agriculture practices and technologies can enhance productivity, food security, and rural development, contributing to inclusive growth by supporting smallholder farmers and improving livelihoods.
Kenya can foster sustainable and inclusive economic growth and achieve its long-term development goals. Encouraging investment in value-added industries can boost export competitiveness and increase export earnings.
Investing in value-added industries is another key recommendation to boost the competitiveness of Kenyan exports by adding value to raw materials before export, leading to increased export earnings and sustainable economic growth.
Strengthening regional trade partnerships, particularly with the EAC bloc and other regions, can stimulate intra-regional trade growth, promote inclusive trade practices, and support sustainable development.
Addressing import dependency, especially for essential commodities like wheat and rice, through strategies that promote local production can improve the trade balance and enhance economic resilience. Supporting small and medium enterprises (SMEs) with targeted incentives and access to finance is essential for fostering entrepreneurship, job creation, and inclusive economic growth.
Prioritising green initiatives and sustainable development projects, such as renewable energy investments and conservation efforts, can address environmental challenges and promote a green economy for long-term sustainable development.
Kenya can foster sustainable and inclusive economic growth and achieve its long-term development goals. Encouraging investment in value-added industries can boost export competitiveness and increase export earnings.
Additionally, implementing trade policies that support export growth, addressing currency fluctuation and promoting a favourable trade environment will create a conducive environment for economic expansion.
The writer is Kenya’s Ambassador to Belgium, Mission to the European Union, Organisation of African Caribbean and Pacific States, and World Customs Organisation. The article is written at a personal level.