NAIROBI, July 9 – A World Bank report released on Wednesday indicated that Kenya would do best to keep political risks low, maintain a stable macroeconomic environment and increase global integration in trade.
World Bank Lead Economist and main author of the report Praveen Kumar said this was the only way to achieve the economic blue print, the Vision 2030.
"At the same time, macro economic stability has in the past produced rich dividends and they (the government) need to continue work on it," said Kumar.
The economist however noted that the economy was yet to embark on a sustained growth path signified through a low investment rate of 15 percent of the Gross Domestic Product (GDP), lack of high productivity, and a lack of diversification in exports.
He said findings of the report indicated there was a need to root out poverty, reduce inequality, increase access to credit and mobilise resources if Vision 2030 is to achieve its goals of making the country a middle income economy.
The report titled, ‘Accelerating and Sustaining Inclusive Growth’ said Kenyan businesses lost 20 percent of their total sales to crime, bribes and power outages, compared to 6.2 and 3.5 percent in China and South Africa respectively.
"Beyond that, it is important for Kenya to look further and improve integration with the global economy, look beyond regional economies to middle income countries and emerging market economies which are good sources of investment and demand," Kumar said.
Kenya is part of two regional blocs, the Common Market for Eastern and Southern Africa (COMESA) and East African Community (EAC), forming its biggest market.
The country\’s rates of investment and savings are at a dismal 15 percent of GDP and need to grow to 32 percent to achieve the targeted growth, Kamau Thugge Economic Secretary at the Finance Ministry said at the report\’s launch.
The World Bank recommended Kenya leans more on long term domestic borrowing for infrastructure expansion and avoid expensive external loans unless they are Diaspora bonds.
The Government plans to launch a US $514 million Eurobond to repair and expand badly-maintained infrastructure next year.
The report also suggests that Kenya marshals private funds for public developmental spending as well as institute the regulatory structures to protect that investment.
Responding to the report, Kenya Association of Manufacturers (KAM) Chief Executive Betty Maina urged the political class to stop using infrastructure as bait to attract votes.
“It’s sad that despite the main highways playing a major role in facilitating trade in the country they are yet to be improved because they do not achieve any political objectives,” she observed.
Maina noted that unless this happens, it would be difficult for the Government to achieve its growth targets, which are hugely dependent on a sound infrastructural framework.
Maina also raised the red flag over the 345 trade licences that were supposed to have been scraped, which are still in operation.
She explained that Local Authorities claim the licences are their main source of revenue and can only be replaced by additional budgetary allocations from the Government.
Thugge responded that Treasury is working on an e-registry and a Regulatory Bill that would address this concern.