World Bank report lists Kenya among Africa’s top economies

Elizabeth Waceke at a tea-buying centre in Nyeri County. The World Bank said Kenya’s economic performance last year was boosted by sustained tea, coffee and horticultural exports. [PHOTO: KIBATA KIHU/STANDARD]

NAIROBI: Kenya is only one of two countries in sub-Saharan Africa enjoying robust growth. The other is Cote d’Ivoire.

According to the World Bank, Kenya has also experienced the least adverse impact on its currency compared to its peers in the continent.

The institution praised the Central Bank of Kenya (CBK) for protecting the economy from the effects of external and internal shocks through prudent monetary policy interventions.

The World Bank made these observations in the 2016 edition of its Africa Pulse report, where it said growth in Sub-Saharan Africa last year declined to 3.0 per cent from 4.5 per cent in 2014.

RISING COSTS

It attributed this performance to low commodity prices, weak global growth and rising costs of borrowing.

This economic environment had the greatest impact on oil-exporting countries, including Nigeria, Congo and Equatorial Guinea, as well as non-energy commodity-exporting ones.

Kenya, which does not rely on oil exports or commodities to boost its earnings, was spared the impact of the commodity slump, and gained from sustained coffee, tea and horticultural exports.

As a result, the shilling’s 12 per cent depreciation against the dollar last year was below the regional average of 14 per cent. The local unit also performed better than its neighbours’ currencies, such as Uganda and Tanzania, whose shillings dipped by 28 and 25 per cent, respectively.

“It boils down to monetary policy, and what we have seen is that the Central Bank’s tightening action on the local currency held the Kenya shilling in place,” said Jane Kiringai, a senior country economist for the World Bank.

She added that with the tightening of monetary policy, lower interest rates may be seen in the second half of this year.

The World Bank, however, said the country needs to increase public investments and tame its high wage bill. These two factors have been identified as some of the vulnerable areas across sub-Saharan Africa’s emerging economies.

Last year, the Government experienced a cash crunch in the first quarter of the 2015-16 financial year on account of depressed revenue collections, which were compounded by CBK’s corrective measures to strengthen the shilling.

The Government is the biggest buyer of goods and services in the country, and the fiscal crunch is said to have impacted negatively on market cash flows.