Money & Banking Opinion & Analysis

Kenyan Economy At a Glance

Monthly time series plot of Kenya’s Public Debt

With the prevailing political stability and the cool political temperatures witnessed in the country after the major handshake between the two political protagonists in Kenya, the key economic indicators have stabilized month on month throughout 2018. For instance, the monthly inflation rate which had reached a high of 8.4% in August 2017 has improved averaging at 4.63% by August 2018 (according to data release by Kenya National Bureau of Statistics). This is attributable to the measures put in place by the Central Bank of Kenya to control interest rates which in return curb the amount of money in circulation. The CBK in the recently concluded Monetary Policy Committee meeting which was held in November 2018 maintained the central bank rate at 9% implying that commercial banks will not be allowed to charge their customers in excess of 13% until 28th January 2019 when such a meeting will be held again.

The exchange rate of the Kenyan Shilling against worlds’ popular currencies has also remained stable over the last couple of months since the conclusion of the electioneering period. For instance, Kenyan shilling against the US dollar has averaged at Ksh102 while that of the shilling against the sterling pound has averaged at Ksh131. The shilling has also strengthened against Japanese Yen and all the East African Community currencies.

On the same note, the public debt has averaged Kshs5.10511 trillion with the external debt standing at Ksh2.6114 trillion accounting for 51.15% of the total public debt and domestic debt standing at Ksh2.49371 trillion accounting for 48.85% of the total public debt as at August 2018. The public debt has been on the rise since President Kenyatta’s governance took over due to massive investment in the capital projects such as Standard Gauge Railway among other major projects. The debt is projected to hit an all-time high of approximately Ksh6.5 trillion by 2022 when President’s Uhuru administration will leave office.

Month Jun-16 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18
Total Public Debt (Ksh Billions) 3611.33 4406.11 4483.03 4569.63 4884.08 5039.03 5146.04
Plot Area: Public Debt at different times of the period starting June 2016 to September 2018

Despite Kenya implementing the controversial VAT law on the petroleum products, global crude oil prices have remained stable owing to the United States increased production moderating effects of OPEC to reduce production, with only minor or ignoble changes and this has contributed to stability in consumer prices hence reducing levels of inflation.

The amendments/enactment of various laws governing registration and operating business in Kenya have proved to be effective with Kenya being ranked as one of the most improved countries in the Doing Business Index setting Kenya as one of the best direct foreign investment hubs in Africa. This true as we have seen Kenya holding high end conferences with the recent being Sustainable Blue Economy Conference which was held late in the month of November. Although Brexit uncertainties are on the verge and placing other countries at the risks resulting from trade protectionism we expect that the prevailing business environment and macroeconomic conditions in Kenya will continue and thus Kenya’s GDP growth rate is also projected to increase as a result of foreseeable direct investments.

Munene Erick
Munene is a top-notch and passionate economist who is confident in his ability to derive clarity, insights, and knowledge from data. He has a vast interest in the economics field. The courses he cares about include: Economic empowerment, poverty alleviation, Education, Environment and Community service. He holds a Bachelor of Economics and statistics of Kenyatta University with an on-going Master of Economics (Policy and Management) in the same institution.

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