Exploit Kenya's status as middle income economy

Kenya rebased its economy last week, which in layman’s language means recalculating the Gross Domestic Product (GDP) — the total value of goods produced and services provided in a country in one year. The recalculation saw Kenya’s GDP expand by more than a quarter, ranking the country among the top ten largest economies in Africa.

To ordinary Kenyans, this should translate to increased school enrollment, better housing and healthcare and access to clean water and food security. But this will not be the case. The World Bank says even as Kenya becomes a middle income country, an estimated four in ten Kenyans are living below the poverty line. To most Kenyans, not much difference will be noted other than the feel-good effect.

While Kenyans may not see an improvement in their incomes, the release of the new numbers gives Kenya a unique international standing in the eyes of investors and development partners. It also gives Kenya a greater positive outlook in terms of economic size, the debt-to-GDP ratio and the country’s per capita income. In most cases, governments aim for a low debt-to-GDP ratio, usually below 50 per cent, as an indication that it produces and sells goods and services in sufficient quantities to pay back debts.

Therefore, the new statistics raises Kenya’s profile as a credit worthy economy. Crucially, it gives the country a positive image to potential investors. The elevation means that some of the indicators of economic sustainability that Kenya has been using, such as wage bill to GDP, will now have different meaning. For instance, the on-going debate on the public wage bill, which is hinged on the GDP ratio, will be much lower than the current 13 per cent.

On the flipside though, the much sought-after middle-income tag would translate to an improved-capacity indicator for Kenya. As such, it might not qualify for interest-free loans and grants from the World Bank. Yet, these have been key financial services from the Bretton Wood institution to the country to boost education, health, infrastructure and agriculture.

Also, this could create an illusion that could see Kenya underestimate its liabilities. The rebasing will make debt levels look small. This could entice the government to borrow more thus exerting massive inflationary pressure to the economy if the tax base is not expanded.

The revision would not take away the country’s infrastructural, insecurity and high cost of production challenges. What are the figures for if they cannot transform people’s lives?

However, at a time when notable brands like Cadbury are leaving the country and moving their operations elsewhere, attracting investment is paramount.

There is nothing unique about rebasing. Nigeria and Ghana have recently done so. Tanzania early this week promised to do the same. The country may now be tagged a middle-income economy, but this does not translate into a better life for the millions of Kenyans living below the poverty line.


This process should at best be exploited by the Jubilee Administration in its resolve to tackle poverty. Solid and long-term plans must be laid out to fight the welfare of Kenyans. The starting point should be making agriculture cheap. Today, this crucial economic activity suffers from high cost of inputs and the Government has done nothing, if any, little, to commercialise the sector.

A hungry nation will no doubt be a burden to growth. Second, the cost of doing business in Kenya must be reduced. More infrastructural investments are needed in roads, railway and most importantly, energy. The cost of power is way too high to sustain sound manufacturing —making Kenya uncompetitive in the region. Third, to arrest disappointments from expectant wananchi, the Government needs to boost their purchasing power by ruthlessly taming prices of basic commodities.

It is, therefore, our desire that the rebasing will re-energise the Government to improve the economy that is now under the mercy of a weakening currency and a relatively high inflation. Otherwise Kenyans will continue to suffer as social inequities trigger more crime, disease and poverty.