Kenya faces tough year ahead, warns the World Bank

By Ben Kinyanjui

The World Bank launches a report on Kenya’s economy tomorrow with a warning that 2012 might turn out to be a difficult year.World Bank Country Director Mr Johannes Zutt predicts a tough year ahead

The bank says the country enters into another election next year after the 2007/08 when violence associated with the disputed presidential results abruptly ended the country’s growth momentum.

Though the much needed reforms are underway, there are fears that much needed to be done to build confidence in local and foreign investors that such occurrence would not happen.

On the economic front, the country is facing shocks associated with high oil prices, recent drought that forced the government to import food as well as uncertainties in the eurozone that has led to volatile exchange rates.

Inflation rate has been on a sharp increase to 19.6 per cent mainly due to high food and oil prices. The Kenya shilling has also been on a free fall making most imports and especially petroleum products very expensive.

“The economy will need to navigate through a severe economic storm which could as well become a hurricane especially if Europe enters into recession,” warns the bank ahead of the launch.

The European Union is the leading export market for the country’s agricultural products like flowers, tea, coffee, fruits and vegetables that would suffer due to low demand as the world’s largest trading block plunge into recession.

The country also requires huge amount to implement the new constitution that has created new governance units that calls for devolved funds.

With the expected slow down of the economy due to the shocks, revenue collection by the Kenya Revenue Authority is expected to decline while donor funds seems to have stagnated.

“Kenya’s policymakers will need to display tremendous skill and steadfast leadership to balance the need for fiscal prudence while ensuring that resource flows to new local governments are sufficient to meet their needs,” says the report.

“High expectations need to be met by equally high quality planning and execution of its delivery.”

World Bank country director Mr Johannes Zutt is expected to launch report that is also supported by the Central Bank of Kenya and the ministry of Finance.