Referendum politics will ruin Kenya's economy, budget experts caution

CORD leader Raila Odinga addresses a crowd during the Okoa Kenya Campaign in Kawangware (Photo: File).

The ongoing political campaigns to drum up support for a referendum will make it difficult for the economy to hit the growth levels experienced seven years ago, prior to the post-election violence.

A parliamentary team of experts in tax, budget and the economy is worried that this political season has weakened investor confidence in the country.

The Parliamentary Budget Office in its report on the implementation of the 2014/2015 budget noted that the current shaky political environment, where top leaders in Government and the Opposition are jostling over the referendum will stall investments.

"Looking ahead, given the prevailing election mood which has persisted since the 2013 polls, the wait and see approach typically adopted by investors during election periods is likely to persist; thereby stalling investment efforts," the Office noted.

The Government is locked in battle with the Opposition and governors to amend the Constitution.

CORD leader Raila Odinga and governors want the Constitution amended to increase allocations to counties. The President and his deputy however see that as a move to cripple the National Government and open doors for the Opposition to vie for the presidency in the next General Election in 2017.

But the economists and fiscal analysts in the Budget Office say the heated campaigns and violence at rallies—such as the one in Migori where chairs, shoes and stones were hurled at a presidential function—are eroding investor confidence that had just began to rise after the 2013 elections.

"It is therefore imperative that we move away quickly from the post-election fever to productive economic engagement for a prosperous Kenya," the Office said in its advisory to MPs. 

FARM PRODUCE

Barely three months into the 2014-2015 financial year, National Treasury Cabinet Secretary Henry Rotich has already seen signs that the economy will fail to hit the 5.8 per cent growth rate that he had envisaged in June.

Rotich blamed tourism, which has been hit by travel advisories as a result of the runaway insecurity, and the slow roll-out of key projects. He revised the growth rate for the current fiscal year to 5 per cent.

The Budget Office noted that the ingredients that led to a 7 per cent growth at the end of 2007 were missing.

However, according to mandarins in the august House, it is not just politics, but other factors which the National Treasury cannot control such as recurrent drought, oil price fluctuations, the global recession and heightened insecurity.

The National Treasury had hoped that the economy would grow because of the increase in agricultural production, and the boom in manufacturing, retail and financial services. They had also hoped that investors would flock to the country to enjoy the larger market presented by the East African Community.

But experts in the Budget Office said there were real risks to the economy as a result of bottlenecks especially in the value-addition on farm produce. The experts also list continued insecurity challenges and low tea prices at the Mombasa tea auction as some of the factors that will 'subdue' the economy.

The Budget Office advises MPs on the economy and the budget. It is worried that the manufacturing sector is not contributing to national wealth and that county governments are not yet ready to pump more resources into development projects.

But the experts are optimistic that the economies of the United States and the European Union will recover quickly so that there is sufficient demand, and therefore market for more goods, a scenario which will boost the country's exports.