Business News
Poverty a big hurdle in achieving Vision 2030
The Kenya Vision 2030 document. Any long-term government plan must address income inequality, which is the result of accumulated years of living in poverty. Photo/WILLIAM OERI
“Low interest rates mean affordable credit so that when a household needs something, it will access it much easier because inflation is not eating into their income, and secondly, they have access to cheap and affordable credit,” the stockbroker said.
Exchange rate
A stable exchange rate would also be advantageous because Kenya has a lot of goods coming from outside, including oil. With a stable exchange rate, the cost of imports would be constant.
Several economists say that to a certain extent, the government has managed to keep interest rates fairly low.
Short-term interest rates are in the range of 7 per cent for 91-day Treasury bills and 8 per cent for 182-day Treasury bills.
Overall inflation
Inflation is measured in two ways: overall, which includes all components of consumer goods and services, and underlying, which excludes food and energy (fuel and electricity).
Underlying inflation excludes these two for one reason. Food and energy are thought to be outside the control of monetary authority, in this case the Central Bank because its mandate is to ensure low inflation, or what they call technically, price stability.
“If you look at underlying inflation, it has been below 10 per cent,” the stockbroker said. “And although CBK targets 5 per cent or less, it now stands at 8 per cent, which is not very high.”
For this reason, Vision 2030 places the highest premium on a stable macroeconomic environment and expects it to continue in the future as a matter of policy.
This is the only way in which confidence among investors and ordinary Kenyans can be maintained. A stable economic environment also works in favour of the poor who stand to lose the most in periods when high inflation eats into their purchasing power.
Major challenge
Whereas Kenya was able to scale up economic growth to 6.1 per cent per annum in 2006, it is recognised that further scaling up to 10 per cent per annum will be a major challenge.
Only a small number of countries, other than those endowed with substantial natural resources, have been able to scale up growth to 10 per cent and to sustain it for a long period.
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