In Summary
  • The government ought to formulate a mitigation plan that would include, perhaps, a rescue package for firms in distress.
  • As dark economic clouds gather, the government would do well to gather experts for consultations and dialogue on response options.

The World Bank Group released its “Global Economic Prospect” report for 2020, in which it paints a more positive assessment of Kenya’s economy.

It forecasts the country’s real gross domestic product growth rate to reach six per cent, from 5.8 per cent, which would rank us among top-performers in Africa.

The sub-Saharan region is expected to have an average growth of 2.9 per cent. But Kenya’s performance would still be slower than that of Uganda, Rwanda and Ethiopia.

The World Bank, however, warns that global and individual economies could be adversely affected by the re-escalation of trade and geopolitical tensions, extreme weather, sharper-than-expected growth slowdown in major economies and resurgence of financial distress in large emerging markets.

The report also acknowledges a slowdown in growth productivity. It calls upon governments to invest in physical, intangible and human capital, reallocate resources towards more productive sectors, boost firm capabilities to accelerate technology adoption and innovation and promote growth-friendly macroeconomic and institutional environment.


While these are sound recommendations, there may be little scope for the government to pursue most of them.

That aside, it would be useful to understand the set of assumptions that informed the model that yielded such favourable assessment for us, given the economic gloom that seems to engulf the country.

We’re already under the onslaught of destructive locusts — a reminder that we are vulnerable to a myriad growth-impeding conditions.

Nairobi and Mombasa, the core urban economies, are facing considerable difficulties. There are unabated job losses, business closures and bankruptcies.

It appears the abrupt collapse of Nakumatt was just the tip of the iceberg; we should be prepared for mass layoffs due to high cost of doing business, suppressed demand, bankruptcies and the accelerated exit of multinationals.

This could be compounded by the collapse of several mismanaged public enterprises in the coming years.

The government ought to have acknowledged these challenges and formulated a mitigation plan that would include, perhaps, a rescue package for firms in distress.


Instead of exploring ways of averting this crisis, government functionaries may be tempted to seek temporary solace in glossy reports such as the “Economic Prospect”.

But signs that things are getting worse are becoming more apparent by the day. The cumulative difficulties households and firms face often show up on the government balance sheet as falling revenue — something that is afoot.

In the coming months, the National Treasury will face the Herculean task of mobilising enough funds for the government to meet its recurrent- and development-related obligations.

Unmitigated private sector bankruptcies and closures imply reduced public revenue, even amid increased pressure for the State to come up with funds to make repayments on the first tranche of standard guage railway-related loans that kicked in this year.

Faced with this sad prospect, it’s infeasible that the government could afford a rescue package, bailout or even a fiscal stimulus!

Expectedly, International Monetary Fund advisers are likely to push for fiscal consolidation as a default strategy in managing a deficit budget and a ballooning sovereign debt.


That could include cancelling or delaying major projects, abolishing a host of public sector allowances, freezing salaries and recruitment, effecting staff redundancies and other measures that would, inherently, reduce government expenditure.

Besides raising taxes, the government may also employ more aggressive resource mobilisation strategies, such as new levies, fees and fines.

As dark economic clouds gather, the government would do well to gather experts for consultations and dialogue on response options.

In the meantime, the political elite may want to let go of their BBI obsession for it is unlikely that it would be of much value in the coming cataclysm.

Mr Chesoli is a New York-based development economist and global policy expert. @kenchesoli