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Why our country is now a middle income economy

Monday September 29 2014

A man sends money using his mobile phone.

A man sends money using his mobile phone. The new figures are expected to capture the growth of the communications industry, including money transfer. FILE PHOTO | DIANA NGILA | NATION MEDIA GROUP

JAINDI KISERO
By JAINDI KISERO
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Kenya will be declared 25 per cent richer than previously thought when a new valuation of goods produced and the work done in the economy is released on Tuesday.

The Kenya National Bureau of Statistics will release figures that will show that the size of the economy is much bigger than thought.

The true value in many sectors, such as property and telecommunications, was not accurately measured in the past, according to the new findings.

Also changing is the rate of growth. For example, growth for last year has been adjusted from 4.7 per cent to 5.7 per cent.

But perhaps most dramatic are the adjustments to the 2010 growth figure that now increases to 8.4 per cent from the previous 5.8 per cent.

RISE IN INCOME

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From these numbers, Kenya’s economy is not only considerably larger than previously assumed, but is chugging along comfortably.

The average income of Kenyans, that is the wealth produced in a year shared among the total population, has been revised upwards from $999.4 to $1,246.

According to these new statistics, Kenya is now a middle income status economy.

But the relatively low average incomes means the country still qualifies for cheaper loans from the World Bank and other multilateral lenders.

However, care must be taken with the new numbers. It does not mean that Kenyans have suddenly become richer in the real sense of money in the bank.

Until the country is able to translate higher wealth numbers into better jobs, better health and improved nutrition, celebrating the new statistics will just be politics.

PROBLEMS REMAIN

Actual improvement in the standard of living of the citizens is a better measure of development than mere accumulation of wealth.

The fact that new statistics show a richer economy does not mean what ails society will go away overnight. Problems such as unemployment remain high and waste of resources through corruption is still rampant.

Crime and the rise in the cost of basic commodities are also unaffected by the new statistics.

Kenya’s performance in the United Nations Human Development Index will not change overnight.

Furthermore, the new wealth figures do not imply that society has recovered in terms of other underlying problems such as inequality, bad politics, environmental degradation and human rights violations.

Still, the process of reviewing wealth statistics, called rebasing, is not an exercise in futility.

The UN Statistics Office expects every country to rebase its national accounts every five years to reflect the changes in the economy.

The new wealth numbers are a tool for economic planning.

The government has more accurate tools to know how much goods and services are produced in the country, how much is consumed and what is invested.

TECHNOLOGICAL IMPROVEMENTS

Clearly, the quality of national statistics is set to improve mainly as a result of improvements in communications technology.

With an estimated 25 million people owning cellphones, it is only a matter of time before people can become regular respondents in censuses and surveys, making it possible to hold household surveys continuously.

In some countries, national statistics bureaus now give families mobile phones free of charge in exchange for answering a questionnaire, say twice a week.

Today, it is possible to use satellite imagery to literally see and gauge, from outer space, economic activity in farms, ports, highways and markets.

And tracking what people do or talk about on the web provides insights into what workers, consumers or investors are thinking about.

In the long run, the quality of statistics will depend on funding, autonomy and independence, which the Kenya National Bureau of Statistics (KNBS) enjoys.

In spite of the critical role it plays, KNBS, unlike the Central Bank of Kenya, operates as an appendage of the Ministry of Devolution and Planning, working directly under direction of politicians.

It has suffered chronic underfunding for years, with most of the money for its programmes coming from donors.

For a long time, surveys were conducted but the data was not analysed.

The Economic Survey and the Statistical Abstract, the two most important reports from the bureau, had no release calendars.

With the advent of the devolved system of government, the quality of statistics on poverty and population will become more and more critical because the numbers  have implications on how revenues are distributed and shared.