NAIROBI, November 21 – The country needs to develop policies that will help it take advantage of the many opportunities that the current global financial crisis presents.
Head of Public Service Ambassador Francis Muthaura said on Friday that although Kenya is not insulated from the on-goings in the global markets, the challenges portend areas which the country can exploit to grow its economy.
“There is a very urgent need for us to go back to the drawing board, take stock and develop timely and appropriate response to the current crisis. Kenya must be creative and think up solutions to this problem,” he told financial experts attending a seminar to discuss the way forward for the country.
Mr Muthaura warned that should a deep recession take hold, then Kenya was likely to be hit by contracted trade, declined Foreign Direct Inflows, a drop in tourism and Diaspora remittances.
Kenya, he added could also experience high exposure and vulnerability in the volatility of the exchange rates, job losses and lower volumes of exports.
However, he urged Kenyans to view this as a silver lining for the country.
Mr Muthaura said the dipping international fuel prices which are currently at $50 per barrel were likely to result in lowered fuel and energy costs which would be welcome news for manufacturers and consumers in general while the weakening shilling would boost tourism.
“The higher cost of inputs may spur the development of industries while raw materials are already available. It may also inspire entrepreneurs to engage in value addition and enhance their competitiveness,” he forecasted.
“The question is; are we prepared to exploit these opportunities?” he posed.
The International Monetary Fund has forecasted that a downward trend in growth for the poor countries saying they will suffer heavy losses in GDP over the next two years as a result of the crunch.
Other experts predict the losses (for developing countries) between now and 2010 to be to the tune of $300 billion.
Mr Muthaura hinted at the possibility of reviewing the development priorities outlined in the Vision 2030.
“Delivering on the ambitious growth targets requires a raise in the ratio of savings to GDP from the current 12 percent to 30 percent in a decade in order to drive the economic pillars in the Vision,” he added.
Mr Muthaura called on financial and investment experts to assist the government is formulating good regulatory regimes and measures that can stimulate economic growth.
“We need to take decisions that will help us remain on track especially regarding the implementation of the Vision 2030,” he challenged.
He disclosed the government was supporting the introduction of the 24-hour economy as one way of accelerating growth but urged the experts to recommend proposals that could be taken to help the country realize the goals envisaged in Vision 2030.
Observing that all the world economies had either been affected or were potentially at risk of being negatively impacted by the global downturn occasioned by the collapse of the US sub prime mortgage and credit market, Mr Muthaura impressed on the need for more stringent regulations of institutions.
“The current crisis may well be the storm of opportunities the world needs in order the change the existing finance order,” advised Mr Muthaura who’s also the Secretary of the cabinet.
The meeting came just two days after Prime Minister Raila Odinga announced government plans to cushion the country against the ripple effects of the unfolding global credit crunch.
Mr Raila called on the public and private sector to collectively work out modalities to counter the trickle effects of the tightened credit conditions.