Kenya’s economy and development aid

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Oil exploration in Turkana Water Project in Turkana, Kenya. is supported also by Slovakia via development aid. Credit: Andrej Matisak

Oil exploration in Turkana Water Project in Turkana, Kenya. is supported also by Slovakia via development aid. Credit: Andrej Matisak

Questions:

1. Kenya is the ninth-largest economy in Africa and is classified as a middle-income country according to the World Bank statistics. How much is the development aid still needed for Kenya?

2. In general, how optimistic or pessimistic are you about the economic growth of Kenya in a long term horizon, what are the positive and what about the negative signs?

Answers:

David Anderson, Director of Graduate Studies in History, Professor of African History, University of Warwick

1. For many years now Kenya has only received very low levels of aid – less than 10 percent of GDP – and is not “aid dependent” in any sense of this term.  Those countries who give aid to Kenya mostly do so through local agencies, rather than through central government.

Simple figures about aid disguise a more interesting reality, however.  If one looks at other forms of assistance, held to be separate from development aid, one sees a very different picture.  So, for example, Kenya’s defence budget has almost doubled in the past three years and now stands close at over $800 million.  Kenya also receives assistance for security and anti-terrorism activity from the USA that amounts to more than $200 million per annum, and from the EU countries amounting to more than euros 300 million.  Much of this security assistance is justified on the grounds that it is needed in order to maintain order and good governance so as to allow development.  Thus, Kenya’s development has been “securitized”.

2. Kenya’s economic vision for 2030 is highly optimistic.  Oil will pump economic growth it is argued, and the construction of a second transport corridor (lappset) will bring development and rapid economic growth to the north.  So the vision goes.  Chinese assistance with construction will help in this plan, but so far the Kenyans have struggled to obtain the levels of investment they need to make this happen.  Insecurity in the north has worried investors, and the perilous state of the tourist industry has diminished the economy more than the government has yet been willing to admit.  Kenya’s leverage is diminishing.  The country is at war, and it now faces an internal insurgency.  These are not good conditions for investment.  Moreover, there is evidence emerging that Kenya’s war economy is riven with corruption.  Last week it was announced that Kenyan’s government ministers will be prosecuted for their part in a vast corruption fraud known as “Anglo-leasing”.  None of this inspires investors with confidence, and without inward investment Kenya cannot achieve its vision.  And if oil prices remain below the mark of $70 per barrel, then Kenya may not even reap the harvest of oil revenues that it so desperately needs.  So, being neither optimistic  nor pessimistic, but instead looking dispassionately at the facts, the forecast looking ahead is not good.  Growth might be achieved, but it will not be at the high rate that Kenya’s government is promoting, and it will not be sufficient to support all of the plans and intentions that have so far been laid down.  Kenya’s future does not, at present, appear too bright, and we may perhaps have to go through a further five years of uncertainty before a real upturn comes along.

Daniel BranchAssociate Professor, African History, History Department, University of Warwick

1. Development aid is still needed as there are significant regional variations in growth and significant inequality. Although Kenya would not experience an economic collapse if aid was to cease, it is extremely important to support the livelihoods of Kenyans living in the particularly arid and peripheral areas of the country and to support vital public services, particularly education and health.

2. I’m relatively optimistic about Kenya’s economic growth, but not to the same extent as the government there. The obvious risks to growth are political – Kenya’s economy suffered badly in a period of poor governance in the 1990s – but Kenyans are resilient and have learned how to succeed despite government policy. East African integration continues to grow stronger and Kenya is well-positioned to make the best of that process.

 

 

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