"If our economic performance of 2011 is anything to go by, we are headed for tough times. The Economic Survey 2012 just released does not paint a rosy picture, and our political landscape is wilting as we rumble towards the General Election, making all less hopeful of the future ahead.
And those at the helm of economic management are engaging in political polemics aimed only at pacifying pessimist voters.
Our GDP grew by 4.4 per cent down from 5.8 per cent in 2010, which will make the folks at Vision 2030 tearfully scratch their heads. All the countries in the region grew by between 5.5 per cent to 6.8 per cent.
Contrary to what our Planning and National Development Minister says, our poor performance has nothing to do with the weather, Eurozone debt or global oil prices as all these countries suffered the same external shocks. It is bad governance that bred poor economic policies, simple.
Our economy is now rated at B+ by Standard & Poor’s as well as Fitch ratings. This is four levels below investment grade, meaning serious international investors are unlikely to put their money here because we just do not meet the mark. This rating places us in the same league as small economies such as Zambia and Cape Verde.
All the key sectors that have driven the economic these past five years performed dismally. Transport & communication, a key growth area in recent years, was down to 4.6 per cent only in spite of huge growth in mobile phone users from 20 to 25 million.
Wholesale & retail, manufacturing and the financial sector all recorded decline in growth.
Agricultural sector grew by 1.5 per cent, compared to 6.4 per cent in 2010. The minister cited the usual factors – erratic weather and high inputs. Never mind that the Government has been spending huge amounts in subsidising fertilisers to the farmers.
Production of all crops declined significantly, including maize, wheat and coffee; but it is all down to persistent poor policies and mismanagement of the sector.
Ironically, it is Njuguna Ndungu’s CBK docket that performed better. Although financial intermediaries sector performed slightly lower than in 2010, it grew at an impressive 7.8 per cent. Credit to private sector grew by 22 per cent despite higher inflation that precipitated the high interest rates regime which subdued borrowings.
His argument about improving supply side for the currency is supported by the current account reports. Exports went up by 25 per cent in value, largely due to depreciated shilling since production was down, whilst imports increased by nearly 40 per cent, even with the currency down.
Poor fiscal policies by the Government contributed to the high inflation rate. Although the minister stated that there was ‘constrained public spending’ and ‘restricted public debt’, the reality was the opposite. Public spending rose from Sh922 billion in 2010 to more than Sh1.2 trillion during the year.
With the 2012/13 budget set at more than Sh1.5 trillion, it is unlikely the borrow and spend culture will go away any time soon.
It is this lack of fiscal responsibility that has expanded our public debt from Sh1.1 trillion in June to 2010 to Sh1.5 trillion today. And before the ink dried on the minister’s statement this week, the Treasury was signing a two-year syndicated commercial loan of $600 million (Sh50 billion), just months after we signed $500m loan with IMF.
And just where does all this money go? Youth employment? No! jobs created, mainly in the informal sector, remained at 520,000; the same annual figure even during Moi era. Not much socially either.
School enrolments increased by a dismal five per cent with only 50,000 children enrolling in primary schools, amid a worsening pupil/teacher ratio of 57:1. Even the essential immunisation coverage for our infants declined to 80 per cent.
The minister projects an ambitious 3.5 per cent growth this year. The Government must create a ‘feel good’ atmosphere which explains the ambitious budget too. The reality is we are headed the Greece way.
The writer is a former MP for Mandera Central and political economist." Courtesy of Standard Digital.
No comments:
Post a Comment