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KENYA2015
Walter O. ODERO / [email protected]
Senior Macroeconomist, East Africa Resource Center, AfDB
Wilmot A. REEES / wilmot.ree!es@und".org
Economic Ad!isor, #$D% &en'a
$ic(olas &)%*E+O / nic(olas.i"'ego@und".org
Researc( Associate, #$D% &en'a
www.africaneconomicoutlook.org
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KENYA
• GDP GROWTH AMOUNTED TO 6.9% AND 5.7% IN 2012 AND 2013, RESPECTIVEL, WHILE
THE201! ESTIMATE AND THE 2015 PRO"ECTION SHOW ECONOMIC E#PANSION O$ 5.3% AND 6.5%,RESPECTIVEL.
• IN 2013 AND 201!, THE ECONOM E#PERIENCED A STALE MACROECONOMIC ENVIRONM
ENT
WITH SINGLE&DIGIT IN'ATION, WHEREAS THE POLITICAL SCENE WAS DOMINATED IN 201! CALLS
TO AMEND THE CONSTITUTION.
• RE$ORMS HAVE EEN INTRODUCED IN (ENA SINCE 1990 TO ADDRESS CRITICAL DI$$ERENCES I
N
ACCESS TO ECONOMIC, POLITICAL AND SOCIAL SERVICES, CULMINATING IN THE INTRODUCTION O
$!7 COUNT GOVERNMENTS IN 2010.
Overview
GDP growth remained robust in 2013 at 5!" based on rebased statisti#s and stood at $$"%
5&" and 55" in the 'rst three (uarters o) 201$ #om*ared with +$"% !2" and +2" in #om*arab,
(uarters o) 2013 A##ording to the #entra, ban-.s e#onomi# month,/ review o) November 201$
growth was main,/ su**orted b/ e*ansion in #onstru#tion% manu)a#turing% 'nan#e and
insuran#e% in)ormation% #ommuni#ations and te#hno,og/% and who,esa,e and retai, trade he
e#onom/ s,owed in the third (uarter o) 201$% *art,/ due to a shar* dro* in tourism )o,,owing
terrorist atta#-s in the #ountr/ Overa,, GDP growth is e*e#ted to amount to ++" and +3" in
2015
and
201+%
res*e#tive,/
onsumer
*ri#e
inde
P4
in6ation
is
e*e#ted
to
remain
in
thsing,e digits% at around 5"% during the same *eriod
he short7 to medium7term *ositive growth *ro8e#tions are based on assum*tions o)9 in#reased
rain)a,, )or enhan#ed agri#u,tura, *rodu#tion: a stab,e ma#roe#onomi# environment: #ontinued
,ow internationa, oi, *ri#es: stabi,it/ o) the Ken/a shi,,ing: im*rovement in the se#urit/ situation
)or a *ositive in6uen#e on the tourism se#tor: and re)orms in the areas o) governan#e and 8usti#e
Po,iti#a, a#tivit/ in 201$ #entred most,/ on the #a,, b/ both the o**osition *art/% oa,ition
)or ;e)orms and Demo#ra#/ O;D% and #ount/ governments
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2
AfricanEco nomicOutlook
© AfDB,O ECD,UNDP2015
%
igure 1 REAL GDP GROWTH
RealGDPgrowth(%) EastAfrica Africa(%)
Source9 A)DB% >tatisti#s De*artment AEO Estimates e: *ro8e#tions *
ab,e 1
MACROECONOMIC DEVELOPMENT2013 2014(e) 2015(p) 2016(p)
RealGDPgrowth 5.7 5.3 6.5 6.3
RealGDPpercapitagrowth 3.0 2.6 3.9 3.7
CPIinflation 7.9 7.0 5.5 5.3
Budgetbalance% GDP -5.6 -8.0 -8.8 -8.3
Currentaccount% GDP -2.9 -7.5 -7.9 -11.2
Source9 Data )rom domesti# authorities: estimates e and *ro8e#tions * based on authorsC #a,#u,ations
;e#ent deve,o*ments and *ros*e#ts
Ken/a rebased its GDP in >e*tember 201$% resu,ting in the #ountr/.s moving to ,ower m
dd,e7
in#ome status he rebasing raised Ken/a.s nomina, GDP )or 2013 )rom >D $$1 b
,,ion to
>D 552 bi,,ion and *er #a*ita GDP )rom >D @@$ to >D 1 2$+ he #ountr/ ,ea*ed )rom th
e 12th
to the @th ,argest e#onom/ in A)ri#a
he government has im*,emented re,ative,/ sound ma#roe#onomi# *o,i#ies in re#ent /
ears%
resu,ting in stab,e ma#roe#onomi# )undamenta,s A *rudent 's#a, stan#e -e*t the budget
e'#it
at an average o) 5" o) GDP in the 've /ears ,eading to 2013 h e de'#it is *ro8e#ted to be
higherthan &" in the short term% main,/ on a##ount o) #ontinued e*ansionar/ 's#a, *o,i#/ due to
,arge
in)rastru#ture investments and #onsum*tion e*enditure
K e n y a
10
9
8
7
6
5
4
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e) 2015(p) 2016(p)
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he or,d Ban-F4 Debt >ustainabi,it/ Ana,/sis D>A #om*,eted in >e*tembe
201$
indi#ates that Ken/a.s ris- o) eterna,7debt distress #ontinues to be ,ow A,, eter
a,7debt
indi#ators remain we,, be,ow the debt7burden thresho,ds under the base,ine s#enario% a
nd no
thresho,ds are brea#hed under an/ o) the standard stress tests
As a share o) GDP% the #urrent a##ount in#reased between 2013 and 201$% main,/ due
o the
widening
o)
the
mer#handise
a##ount
b/
>D
@&0
mi,,ion
to
stand
at
>D
122!2
bi,,ion
in the
/ear to O#tober 201$% whi#h more than o?set the @+" im*rovement in the va,ue o) the se
rvi#es
a##ount he widening o) the mer#handise a##ount was a resu,t o) in#reasing im*ort
whi,e
© AfDB,OECD,UNDP2015 AfricanEconomicOutlook 3
e*orts remained )air,/ stab,e Des*ite the )a,,ing *ri#e o) oi, e*e#ted to #ontinue through
201+% the #urrent7a##ount de'#it is e*e#ted to grow to 112" in 201+ due to ,arge e(ui*ment and
hardware im*orts *,anned )or in)rastru#ture investments
4n a drive to im*rove the business environment in Ken/a% the government% in #o,,aboration
with its deve,o*ment *artners% the *rivate se#tor and #ivi,7so#iet/ organisations% he,d a themati#
Deve,o*ment Partners orum DP at the end o) >e*tember 201$ on the theme o) HEase o) Doing
BusinessI
his
was
)o,,owed
b/
the
third
Presidentia,
;ound
ab,e
meeting
in
De#ember
201$%
#haired b/ the *resident% whi#h too- sto#- o) the *rogress that had been made 4t was #on#,uded
that the #ountr/ shou,d #ontinue to address the in)rastru#ture% energ/ and se#urit/ #ha,,enges
that have been a?e#ting the business environment adverse,/ i) it was to be#ome an attra#tiv
investment destination
he government and deve,o*ment *artners he,d a se#ond DP in ebruar/ 2015 o
n
HDevo,utionI he )orum was main,/ )o#used on the 's#a, de#entra,isation #ha,,enges )a#ed b/
the #ount/ governments% re(uisite #a*a#it/ bui,ding% and intergovernmenta, and #o7ordination
re,ated issues 4t was agreed that revenue mobi,isation shou,d be enhan#ed at #ount/ ,eve,s% where
e*enditure shou,d a,so be rationa,ised Adheren#e to #onstitutiona, and other ,ega, *rovisions
was a,so em*hasised
4n 2013% agri#u,ture #ontributed about 30" to GDP% )o,,owed b/ 'nan#e% rea, estate an
business servi#es at 15&" ab,e 2 anu)a#turing remained stagnant and #ontributed 11!" to
GDP% down )rom 13$" in 200@
o,,owing the dro* in internationa, oi, *ri#es% the domesti# *ri#es o) su*er and regu,ar *etro,%
diese, and *ara=n have a,so dro**ed sin#e 201$ b/ an average 23" between 1 ar#h 201$ and
1 ar#h 2015% #om*ared to a 3" dro* in the same *eriod between 2013 and 201$ h e dro* i
n
)ue, *ri#es% however% has not resu,ted in a simi,ar dro* in *ri#es o) goods and servi#es os
traders% main,/ in the *ub,i#7trans*ort se#tor% have #om*,ained that other #osts% )or eam*,e
maintenan#e #osts% have either risen or remained the same% hen#e the ,a#- o) dro* in *ri#es
ab,e 2 GDP SECTOR )PERCENTAGE O$ GDP AT CURRENT PRICES*
2009 2013
Agriculture,forestry,fishing&hunting 26.1 29.5
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ofwhichfishing … …
Miningandquarrying 0.7 0.9
ofwhichoil … …
Manufacturing 13.4 11.7
Electricity,gasandwater 2.5 2.2
Construction 4.4 5.0
Wholesale&retailtrade;repairofvehicleshouseholdgoods; 10.2
ofwhichhotelsandrestaurants 2.0 1.4
Transport,storageandcommunication 10.9 9.9
Finance,realestateandbusinessservices 16.2 15.8
Publicadministrationanddefence 5.0 5.4Otherservices 10.9 9.3
Grossdomesticproductatbasicprices/factorcost 100.0 100.0
Source9 Data )rom domesti# authorities
4 AfricanEconomicOutlook © AfDB,OECD,UNDP 2015
a#roe#onomi# *o,i#/
$ISCAL POLIC
Ken/a.s ta7revenue7to7GDP ratio o) about 20" sin#e 2010 has been high b/ regiona,
standards%
e#eeding the ta7to7GDP ratios in anJania 1!$" in AY 2013F1$ and ganda 13" in AY
2013F1$
h e 's#a, de'#it in#,uding grants remained around 5" o) GDP between 's#a, /ears 2011F
2 and
2012F13% rising )rom $0" to 5+"% res*e#tive,/ hi s trend was maintained des*ite9 i)
severa,
new institutions estab,ished to im*,ement the 2010 #onstitution% both at the nationa, ,eve
and
within the $! #ounties% whi#h has *ut *ressure on the government )or in#reased s*ending
and
ii) *ressure )rom *ub,i# servants to have their remuneration and other *ub,i# bene'ts in#rea
sed
he share o) )unds )or e#onomi# deve,o*ment in the tota, government budget #on
inued
to rise )rom 2!!" in 's#a, /ear 200@F10 to 302" in 's#a, /ear 2011F12 and s,ight,/
down to
2!$" in 2013F1$ 4n addition% the government earmar-ed deve,o*ment7'nan#ing a,,o
ations
to the $! #ounties in the 2012F13% 2013F1$ and 201$F15 's#a, /ears his is #onsistent
with the
government.s ob8e#tive o) a,,o#ating more resour#es to in)rastru#ture deve,o*ment and to #
rowdin *rivate investment in order to ,a/ the )oundations )or high e#onomi# growth as unders#o
ed in
ision 2030% Ken/a.s ,ong7term deve,o*ment b,ue*rint
Restaurantsandhotels @&
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he government has #ontinued to e*and borrowing )or in)rastru#ture *ro8e#ts b/ is
suing
in)rastru#ture bonds and through the su##ess)u, issuan#e o) the eurobond in 201$
whi#h
generated >D 2 bi,,ion )or the government and was oversubs#ribed )our)o,d As observed b
/ the
4 >e*tember 201$ re*ort% the )avourab,e terms o) Ken/a.s 'rst7ever eurobond% the ,argest
so )ar
in sub7>aharan A)ri#a% re6e#ts the )avourab,e *osition o) Ken/a re,ative to other )rontier ma
-ets he
201$F15
budget
in#or*orates
im*ortant
revenue
measures
hese
measures
i
n#,ude9
i) a revision o) the E#ise and 4n#ome a A#ts% ii) higher duties on iron and stee, *r
du#ts%
iii) im*roved ta administration% es*e#ia,,/ in the #ase o) A and iv) amendments to the 4n#o
me
a A#t to address ta avoidan#e b/ mu,tinationa,s E*e#ted higher revenue wi,, a,so re6e
#t the
)u,,7/ear e?e#ts o) A re)orms introdu#ed in >e*tember 2013% as we,, as the im*a#t o)
measures
ado*ted to in#or*orate ,and,ords into the ta base he authorities e*e#t these meas
ures
to/ie,d about 13" o) GDP in 201$F15
ota, revenue as a *er#entage o) the GDP is there)ore e*e#ted to average 22" in th
e net
two /ears whi,e tota, e*enditure and net ,ending wi,, remain above 30"% and the overa,, b
udget
de'#it wi,, remain above &" o) the GDP
ab,e 3 PULIC +NANCES )PERCENTAGE O$ GDP AT CURRENT PRICES*
2005/2006 2010/2011 2011/2012 2012/2013 2013/2014(e) 2014/2015(p) 2015/2016(p)
Totalrevenueandgrants 20.2 20.3 21.6 20.4 21.6 22.5 22.2
Taxrevenue 17.3 16.5 16.9 16.2 20.1 20.9 20.7
Grants 1.2 0.6 1.1 0.9 1.5 1.6 1.5
Totalexpenditureandnetlending(a) 23.4 24.0 25.6 26.0 29.6 31.3 30.5
Currentexpenditure 19.0 17.5 17.1 19.3 22.5 24.4 26.2
Excludinginterest 16.5 15.2 14.9 16.5 19.8 19.8 18.8
Wagesandsalaries 6.9 5.9 5.7 6.6 7.6 7.0 6.8
Interest 2.5 2.3 2.2 2.7 2.7 4.6 7.4
Capitalexpenditure 4.1 6.4 8.4 6.7 7.0 6.9 4.3
Primarybalance -0.6 -1.5 -1.8 -2.9 -5.3 -4.2 -0.9
Overallbalance -3.1 -3.7 -4.0 -5.6 -8.0 -8.8 -8.3
Note 9 a On,/ ma8or items are re*orted
Source9 Data )rom domesti# authorities: estimates e and *ro8e#tions * based on authorsC #a,#u,ations
© AfDB,OECD,UNDP2015 AfricanEconomicOutlook 5
MONETAR POLIC
K e n y a
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Annua, head,ine in6ation is *ro8e#ted to ease to 55" in 2015 )rom !0" in 201$ he governmen
t.s
target is to -ee* in6ation at around 5" he entra, Ban- o) Ken/a BK has *ursued a *rudent
monetar/ *o,i#/ stan#e overa,, o #ontro, in6ation% the BK retained the #entra, ban- rate a
&5" between a/ 2013 and ar#h 2015 he Ken/a Ban- ;e)eren#e ;ate KB;;% a uni)orm base
rate that is used to in)orm #ommer#ia, ban- ,ending rates% was redu#ed )rom @1" in Lu,/ 201$ to
&5$ in Lanuar/ 2015 hese measures have mitigated interna, and eterna, sho#-s and ,ed to a
re,ative stabi,it/ o) domesti# *ri#es and o) the e#hange rate sin#e 2012 A,though introdu#tion o)
the KB;; was e*e#ted to #ontribute to redu#ing ,ending rates% the average ,ending rate had on,/
)a,,en b/ one *er#entage *oint to 15@" in Lanuar/ 2015 4t is however e*e#ted that the s*read
)rom the base rate wi,, dro* to 5&" b/ Lu,/ 2015 )rom the end7201$ 'gure o) !&"
As #on'rmed b/ the 4 >e*tember 201$ re*ort% the BK has -e*t net domesti# assets we,,
be,ow the *rogramme7sti*u,ated #ei,ing and net internationa, reserves above the 6oor% than-s
in *art to *rivate #a*ita, in6ows% *arti#u,ar,/ to the e(uit/ mar-et Ken/an #ommer#ia, ban-s
are e*anding b/ raising domesti# #redit% *roviding new borrowers with a##ess to )unds and
in#reasing o*erations be/ond Ken/a.s borders Ban-s remain sound and *ro'tab,e des*ite a
moderate 5+" in#rease in the ratio o) non7*er)orming ,oans NPMs to tota, ,oans in a/ 201$
u* )rom $+" one /ear ear,ier redit growth has been in#reasing,/ )unded eterna,,/% main,/
owing to a more intensive use o) medium7term% most,/ #on#essiona, )oreign7#urren#/ ,ines )or
sma,, and medium7siJed enter*rise >E *ro8e#t 'nan#ing and in#reased #redit ,imits *,a#ed
b/ internationa, ban-s on their subsidiaries inan#ia, in#,usion #ontinues to *rogress with mobi,e
ban-ing ,oans and de*osits driven b/ 7>hwari% a new mobi,e mone/ ban-ing servi#e ! mi,,ion#ustomers in its 'rst /ear o) o*erations and higher >E a##ess to #redit ;egiona,,/% the BK is
a,so a#tive,/ negotiating an East A)ri#an ommunit/ EA monetar/ union% s,ated to #ome into
e?e#t in 2022
he e#hange rate remained stab,e &+@ Ken/a shi,,ings to KE> &@5 *
r
>D )rom Lanuar/ to November 201$ e#urities E#hange N>E% and an im*roved ma#roe#onomi# stabi,it/
boosting investor #on'den#e he e#hange rate is e*e#ted to remain stab,e in the medium term
des*ite #ontinued *ressure )rom the widening #urrent a##ount in addition to the in6ationar/ ris-
asso#iated with the monetar/ easing to stimu,ate growth
4n ebruar/ 2015% the 4 a**roved Ken/a.s re(uest )or a >D +&&3 mi,,ion standb/ ,oan that
wi, , on,/ be drawn u*on i) needed he mone/ wou,d be avai,ab,e to the BK in the 's#a, /ear
2015F1+ to #ushion interna, and eterna, sho#-s to the ,o#a, #urren#/ in #ase the/ shou,d o##ur%
su#h as adverse weather #onditions or ma8or im*orts )or in)rastru#ture *ro8e#ts
ECONOMIC CO&OPERATION, REGIONAL INTEGRATION AND TRADE
Ken/a is one o) the -e/ drivers o) e#onomi# #o7o*eration within eastern A)ri#a b/ *romoting
trade )a#i,itation through enhan#ements at the Port o) ombasa now o*erating 2$F!% investing
in the im*rovement o) the northern #orridor road networ- and in 201$% ,aun#hing #onstru#tion o)
the >tandard Gauge ;ai,wa/ to ,in- ombasa to Kam*a,a with a >D 5 bi,,ion ,oan )rom hina
Ken/a a,so ,aun#hed the Mamu Port and >outh >udan7Ethio*ia rans*ort road and rai, networ-
with
the
#onstru#tion
o)
berths
at
Mamu%
in
*rogress
he
Lomo
Ken/atta
4nternationa,
Air*ortremains the gatewa/ to East A)ri#a and its e*ansion is underwa/ to enab,e the air*ort to hand,e
more #argo and *assengers Ken/a there)ore a#tive,/ *romotes and #ondu#ts trade with a, , its
neighbours% in#,uding war7torn >oma,ia
Ken/a is one o) the most *roa#tive and ,eading eam*,es in the im*,ementation o) a
#onventions and agreements inside the EA he ado*tion o) a uni(ue e,e#troni# identit/ #ard%
6 AfricanEconomicOutlook © AfDB,OECD,UNDP 2015
8/17/2019 Kenya GB 2015
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soon to be a#tive% has seen #ountries ,i-e Ken/a and ;wanda at the )ore)ront o) this initiatve 4n
ebruar/ 201$% the >ing,e East A)ri#a ourist isa was o=#ia,,/ ,aun#hed b/ the eads o) >
ate o)
Ken/a% ;wanda and ganda in Kam*a,a% #om*,eting one o) the ma8or integration *ro8e#ts 8
int,/
underta-en b/ the three #ountries
he trade ba,an#es as *er#entages o) GDP% shown in ab,e $ be,ow% de*i#t genera, vo,
ti,it/
sin#e 200+ or eam*,e% the #urrent7a##ount ba,an#e worsened )rom a de'#it o) 1@" in
200+ to
one o) @$" in 2011 be)ore im*roving to a de'#it o) 2@" in 2013 he #urrent7a##ount d
e'#it is
*ro8e#ted to worsen to 112" in 201+ 4n terms o) va,ue% the overa,, ba,an#e7o)7*a/ments
sur*,us
im*roved to >D 150! bi,,ion in the /ear to O#tober 201$ )rom >D +0! mi,,ion in the
/ear to
O#tober 2013 he #urrent7a##ount ba,an#e worsened b/ !5" to a >D 5$22 bi,,ion de'#it
in the
/ear to O#tober 201$ )rom >D 50$1 bi,,ion de'#it in the /ear to O#tober 2013 his deterio
ration
re6e#ts an &!" worsening o) the mer#handise7a##ount de'#it% whi#h more than o?set the
@+"
im*rovement in the servi#es7a##ount sur*,us
As shown in ab,e $% the trade ba,an#e is *ro8e#ted to remain at an 117to712" de'#it in
2015
and 201+% owing to in#reasing im*orts o) e(ui*ment and in)rastru#ture7re,ated materia
s he
#urrent7a##ount ba,an#e is e*e#ted to #ontinue to worsen% rising to above 11" in 20
1+ he
government wi,, need to *ut measures in *,a#e aimed at in#reasing e*ort earnings% )rom
bothgoods and servi#es% in order to im*rove the eterna, *osition in the medium term
;emittan#e in6ows remained resi,ient in 201$% with an 11" in#rease o) the #umu,ative 6
ow to
>D 1$2 bi,,ion )rom >D 12@ bi,,ion remitted in 2013 O=#ia, reserves he,d b/ the BK in#
eased
to >D !&3@ bi,,ion 51 months o) im*ort #over at the end o) O#tober 201$ )rom >D +2+3
bi,,ion
$3 months o) im*ort #over at the end o) O#tober 2013
ab,e $ CURRENT ACCOUNT )PERCENTAGE O$ GDP AT CURRENT PRICES*
2006 2011 2012 2013 2014(e) 2015(p) 2016(p)
Tradebalance -12.6 -20.6 -18.9 -13.0 -14.1 -11.1 -12.1
Exportsofgoods(f.o.b.) 13.6 14.2 12.5 13.4 12.5 10.7 9.5
Importsofgoods(f.o.b.) 26.2 34.8 31.3 26.3 26.6 21.8 21.6
Services 4.1 4.8 5.0 4.9 4.1 5.1 4.4
Factorincome -0.3 -0.1 -0.3 -0.6 -1.1 -2.1 -3.8
Currenttransfers 6.9 6.5 5.7 5.8 3.5 0.2 0.2
Currentaccountbalance -1.9 -9.4 -8.6 -2.9 -7.5 -7.9 -11.2
Source9 Data )rom domesti# authorities: estimates e and *ro8e#tions * based on authorsC #a,#u,ations
DET POLIC
Ken/a su##ess)u,,/ ta**ed internationa, #a*ita, mar-ets with a debut >D 2 bi,,ion euro
bond
issuan#e O) the *ro#eeds% >D +00 mi,,ion were used to re*a/ a s/ndi#ated ,oan #ontra#
ed in
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2012 and the remaining wi,, serve to 'nan#e energ/ and in)rastru#ture *ro8e#ts h e is
suan#e
#om*rises a 've7/ear bond tota,,ing >D 500 mi,,ion and a ten7/ear bond tota,,ing >D 15 b
,,ion
h e government a,so signed a ,oan with hina in a/ 201$ )or the #onstru#tion o) the om
asa7
Nairobi >tandard Gauge ;ai,wa/ >D 5 bi,,ion% to be im*,emented in about 've /ears
Ken/a
has not sought debt re,ie) under either the eavi,/ 4ndebted Poor ountries initiative
or the
u,ti,atera, Debt ;e,ie) 4nitiative he share o) debt )rom *rivate #reditors #ontinued to in#ease
in 201$% re6e#ting Ken/a.s su##ess)u, inaugura, sovereign bond issuan#e in Lune 201$
A##ording to a the D>A #ondu#ted b/ the nationa, treasur/ 8oint,/ with the or,d Ban- a
d the
4 in >e*tember 201$% Ken/a.s debt burden in re,ation to thresho,ds )or a Hmedium *er)o
merI
#ountr/ shou,d de#,ine substantia,,/ b/ 202$ here is there)ore s*a#e )or the u*ta-e
) more
debt he ana,/sis in#or*orated as a -e/ assum*tion that the 2013F1$ >D 2 bi,,ion so
vereign
debt wou,d #ontra#t% whi#h it did he 'ndings noted that the *ub,i# debt shou,d *ea-
n
2015
© AfDB,OECD,UNDP2015 AfricanEconomicOutlook 7
and subse(uent,/ remain on a downward trend in the base,ine s#enario 4n 201$% overa,, *ub,i#
debt is estimated to have risen to $5" o) GDP he sovereign7bond issuan#e and rai,wa/7,oan
disbursements shou,d ,i)t *ub,i# debt to around $+" o) GDP in 2015 4n subse(uent /ears% based on
the assum*tion that the *rimar/ de'#it is -e*t to 3" o) GDP in 201+ and gradua,,/ brought down
therea)ter% *ub,i# debt shou,d ease to be,ow $+" o) GDP b/ 201& 4n *resent va,ue P term
%
the *ub,i# debt7to7GDP ratio wou,d remain stab,e around $17$2" through to end7201&% )a,,ing
therea)ter he P o) the *ub,i# debt7to7revenue ratio wou,d gradua,,/ de#,ine )rom around 200"
in 201$715 to 1@1" in 201&
igure 2 STOC( O$ TOTAL E#TERNAL DET )PERCENTAGE O$ GDP* AND DET SERVICE
)PERCENTAGE O$ E#PORTS O$ GOODS AND SERVICES*
%
35
30
25
20
15
10
5
0
K e n y a
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Outstandingdebt(publicandprivate)/GDP
Debtservice/E
xports
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source 9 4 EO Arti#,e 4
E#onomi# and *o,iti#a, governan#e
PRIVATE SECTOR
he Government o) Ken/a #ontinues to ma-e signi'#ant strides in im*roving the #ountr/.s
business environment% *rimari,/ through signi'#ant investments in *h/si#a, in)rastru#ture 4n
)urtheran#e o) its agenda to *romote an e?e#tive *ub,i#7*rivate dia,ogue% the government% in
#o,,aboration with the Ken/a Private >e#tor A,,ian#e KEP>A% estab,ished the Presidentia, ;ound
ab,e P; dis#ussion series aimed at eamining the ro,e ea#h *artner shou,d *,a/ in im*roving
the business #,imate in Ken/a h ree P; meetings were he,d in 201$ at whi#h the #riti#a, issues
dis#ussed in#,uded9 in)rastru#ture deve,o*ment energ/% roads% rai,% tra=# #ongestion% s*eed/
*ort servi#es and e*ansion o) the *ort: taes *o,i#/ stabi,isation in the taation regim
%
*arti#u,ar,/ the A and e#ise and #ustom duties: ,and in#reasing a##ess and removin
g
#onstraints that *revent eas/ registration o) *ro*erties b/ businesses: trading a#ross borders
e,iminating
)ragmentation
o)
do#umentation%
#om*,i#ated
border
*ro#esses
and
bureau#rati#bott,ene#-s: and en)or#ing #ontra#ts and reso,ving #ommer#ia, dis*utes
he or,d Ban- re*ort Doing Business 2015 showed that the #ountr/.s ran-ing had de#,ined
to 13+th out o) 1&@ #ountries in 201$ )rom 12@th in 2013 he )a,, was attributed to high tae
s
s*e#i'#a,,/% an in#rease in em*,o/ers. so#ia,7se#urit/ #ontribution rate and the high #ost o)
getting
8 AfricanEconomicOutlook © AfDB,OECD,UNDP 2015
#onstru#tion *ermits One area where it was re*orted to have made signi'#ant im*roement
was the in the ease o) getting #redit b/ investors he #ountr/.s G,oba, om*etitivenes
s 4nde
ran-ing im*roved margina,,/ to @0th out o) 1$$ #ountries )or 201$F15% #om*ared to @+th
out
o) 1$& #ountries )or 2013F201$
Overa,,% Ken/a has a re,ative,/ mar-et7)riend,/ business environment in whi#h >Es ar
ver/
d/nami#% due main,/ to strong 'nan#ia, in#,usion and sma,,7business a##ess to #redit%
whi#h is
a,so one o) the re)orms #ited in the or,d Ban- re*ort Doing Business 2015 where Ken/a has show
n
substantia, im*rovement
$INANCIAL SECTOR
Ken/a.s 'nan#ia, se#tor #ontinues to demonstrate strong growth than-s ,arge,/ to in)orm
ation
K e n y a
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and #ommuni#ation te#hno,ogies and innovations% ma#roe#onomi# stabi,it/% and domest
# and
regiona, e*ansion in e#onomi# a#tivities at the devo,ved ,eve, o) government he
an-ing
se#tor% whi#h is ,arge,/ *rivate7se#tor driven% sti,, #om*rises $3 ,i#ensed #ommer#ia,
ban-s and
1 mortgage 'nan#e #om*an/% @ de*osit7ta-ing mi#ro'nan#e institutions% ! re*resentative
o=#es
o) )oreign ban-s% 101 )oreign7e#hange bureaus% 1 remittan#e *rovider and 2 #redit re
eren#e
bureausPersons a##essing 'nan#ia, servi#es in#reased )rom 2!" o) the adu,t *o*u,ation in 2
00+ to
+!" in 2013 4n addition% a )ree,/ avai,ab,e do#ument ma**ing a, , 'nan#ia, tou#h *oints% th
e 201$
inA##ess G4> a**ing% shows that !!" o) the adu,t *o*u,ation ,ives within 5 -m o) a 'na
n#ia,
servi#e *rovider% #om*ared to 35" in anJania% $!" in Nigeria and $3" in ganda
Domesti# #redit )rom the ban-ing se#tor in#reased b/ KE> 3&0+ bi,,ion 211" in
the 12
months to August 201$% versus KE> 20&5 bi,,ion 130" in the same *eriod in 2013 his in
#reasewas ,arge,/ re6e#ted in growth o) #redit to the *rivate se#tor% whi#h a##e,erated to
$5" in
the /ear to August 201$ )rom 1+2" in the same *eriod in 2013 he *rivate se#tor #ontin
ued to
dominate ban-ing7s/stem ,ending% a##ounting )or &12" o) tota, ,ending in August 201$ #om
*ared
with a 1!0" share o) ,ending to the government
he N>E is the ,argest se#urities e#hange in both East and entra, A)ri#a 4t a##ounts
)or 5@
o) the @3 #om*anies in the who,e o) East A)ri#a and it is the )ourth ,argest mar-et in A)ri
a 4tsannua,ised returns stand at 3+"% ma-ing it the se#ond7best *er)orming mar-et on the A
)ri#an
#ontinent 4n terms o) va,ue% whi#h #om*rises both debt and e(uit/% it stood at KE> 1! tri,
on in
Lanuar/ 2015
redit growth has a##e,eratedshar*,/ in ,ending to manu)a#tur ing %rea, estate%
te,e#ommuni#ations% business servi#es and individua,s his is e*,ained to a ,arge e
ent b/
an u*ward shi)t in #redit demand #onsistent with the initiation o) new *ro8e#ts On th
other
hand% the ,atest BK data shows that NPMs in#reased b/ 30@" in 2013 to KE> 10!1
bi,,ion
inDe#ember 201$% main,/ due to *oor *er)orman#e in the tourism se#tor a)ter it was hit b/ th
wave
o) inse#urit/ #on#erns in 2013% a s,owdown in agri#u,tura, e*orts and the government.s de
a/ in
*a/ing #ontra#tors he Ban-ing >u*ervision De*artment o) the BK monitors these ris-s #
ose,/%
and regards the im*a#t o) rising NPMs on ban-s. 'nan#ia, statements as ,arge,/ manageab
e
PULIC SECTOR MANAGEMENT, INSTITUTIONS AND RE$ORM
A##ording to the Ken/a >a,aries and ;emuneration ommission >;% over 55"
o)
the
government.s domesti# revenue was being s*ent on sa,aries to *ub,i# servants in De#embe
201$
8/17/2019 Kenya GB 2015
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h e >; )ears that the wage bi,, wi,, attain unsustainab,e ,eve,s he >; has #omm
en#ed a
#om*rehensive 8ob eva,uation o) a, , state o=#ers as we,, as a series o) #onsu,tations and dia
,ogue
at both the nationa, and #ount/ ,eve,s in order to raise awareness about the unsustainab,e
wage
bi,, his is being done in #o,,aboration with re,evant government ministries su#h as the Na
iona,
reasur/ and the inistr/ o) Devo,ution and P,anning
© AfDB,OECD,UNDP2015 AfricanEconomicOutlook 9
4n August 201$% the government ,aun#hed biometri# registration o) *ub,i# servants as *art o)
the 4nter7Governmenta, >teering ommittee )or the a*a#it/ Assessment and ;ationa,iJation o)
the Pub,i# >ervi#e Programme h e eer#ise estab,ished the wor-)or#e at 1@0 000 with about 12 00
non7eistent wor-ers i,,ega,,/ ,isted in the government.s *a/ro,, An ear,ier audit underta-en in
ear,/ 201$ )ound that Ken/an ta*a/ers were ,osing more than KE> 1& bi,,ion annua,,/ on sa,ar/
*a/ments to HghostI wor-ers and other 'nan#ia, ma,*ra#ti#es in the #ivi, servi#e
B/ Lanuar/ 2015% the harmonisation o) a,,owan#es in the *ub,i# servi#e nonethe,ess ,ed to a
*ro*osed additiona, *a/ment o) KE> 1@! bi,,ion >D 21&& mi,,ion to be made in 2015F1+ his
does not in#,ude the demands )or a more than 200" *a/ rise% an a,most additiona, KE> 255 bi,,ion
>D 2& bi,,ion )or the more than 2!0 000 tea#hers #urrent,/ undergoing a dis*ute reso,ution b/
the 8udi#iar/ 4) a, , these *a/ments are brought into e?e#t% the #ountr/.s wage bi,, #ou,d rise to
KE> &23 bi,,ion >D @0$ bi,,ion% or @0" o) domesti# revenues be)ore )urther harmonisation to
a,ign the rest o) #ivi,7servi#e wages with those o) tea#hers
4n
the
orru*tion
Per#e*tions
4nde
P4
o)
201$
*re*ared
b/
rans*aren#/
4nternationa,%Ken/a is ran-ed 1$5th out o) 1!5 assessed #ountries with a s#ore o) 25 out o) a *ossib,e 10
0
he #ountr/ has a #onsistent,/ *oor *er)orman#e in rans*aren#/ 4nternationa,.s P4% ran-ing
at the bottom o) the inde% amongst the #ountries *er#eived as most a?e#ted b/ *ub,i#7se#tor
#orru*tion A ,arge ma8orit/% !0"% o) res*ondents to rans*aren#/ 4nternationa,.s G,oba
orru*tion Barometer 2013 indi#ated that the/ had *aid a bribe to at ,east one o) eight *ub,i#
servi#es in the twe,ve months *re#eding the surve/
NATURAL RESOURCE MANAGEMENT AND ENVIRONMENT
Over !5" o) Ken/a.s *o*u,ation is dire#t,/ de*endent on ,and and natura, resour#es )or
,ive,ihood% whi#h is ver/ mu#h vu,nerab,e to the e?e#ts o) #,imate #hange% su#h as a,ternating
droughts and 6oods Ken/a has however ta-en #ommendab,e ste*s to *rote#t its environment asarti#u,ated in the 2010 onstitution o) Ken/a A##ording to the Ken/a E#onomi# >urve/ 201$% $2"
o) the #ountr/.s GDP is derived )rom natura, resour#es his is one o) the reasons the government
has *rioritised a #,ean% se#ure and sustainab,e environment as a )undamenta, goa, to be a#hieved
b/ 2030 he government% through the Nationa, Environment and anagement Authorit/ is
a,so im*,ementing *rogrammes aimed at a#hieving sound environmenta, management whi,e
at the same time redu#ing the #ountr/.s vu,nerabi,it/ to the adverse e?e#ts o) #,imate #hange
hese measures have in#,uded the deve,o*ment and ,aun#hing o) the Nationa, ,imate hange
;es*onse >trateg/ in 2010 and the Nationa, ,imate hange A#tion P,an 201371! in ear,/ 2013
4n terms o) )orest #over% the target o) ision 2030 is to meet a 10" minimum o) )orest #over
and to *,ant about seven bi,,ion trees to address )ood% water and energ/ se#urit/ 4n 2011% Ken/a.s
tota, area o) )orest #over amounted to ++" and b/ 2013 had in#reased b/ 03@"% so good *rogress
was made towards a#hieving the 10" target with a view to #om*,/ with i,,ennium Deve,o*mentGoa, DG ! ensure environmenta, sustainabi,it/ as we,, as DG 1 eradi#ate etreme *overt/
and hunger
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POLITICAL CONTE#T
he *o,iti#a, s#ene was dominated in 201$ b/ a *ush )or a re)erendum b/ both the o**osition
*art/% the O;D% and the oun#i, o) Governors% whi#h was mat#hed b/ the government.s ,aun#h
o) a #ounter7re)erendum initiative
4 #ases in he ague against the *resident% the de*ut/ *resident and a radio 8ourna,i st
were a,so *rominent,/ )eatured in the *o,iti#a, dis#ourse On 3 De#ember 201$% the #ase against
the *resident was dismissed )or ,a#- o) substantia, eviden#e% but the #ases against hi s de*ut/ and
the 8ourna,i st were #ontinuing in ear,/ 2015
10 AfricanEconomicOutlook © AfDB,OECD,UNDP 2015
he se#urit/ situation in the #ountr/ #ontinues to remain )ragi,e% ea#erbated b/ ,ong% *orous
borders% the *resen#e o) more than +00 000 re)ugees in the north7eastern *art o) the
ountr/
and regiona, instabi,ities% es*e#ia,,/ in >oma,ia% >outh >udan and the Great Ma-es ;egion
n the
months o) a/% Lune and November 201$% the #ountr/ e*erien#ed devastating vio,en#e
in the
andera% a8ir% ana De,ta and Mamu distri#ts ,eading to the deaths o) more than 125 *e
sons
A##ording to o=#ia, 'gures% the number o) interna,,/ dis*,a#ed *ersons a#ross the #ountr/
was
estimated to be higher than 215 000 at end7201$
o address and ade(uate,/ res*ond to the man/ se#urit/ #ha,,enges )a#ed b/ the #ountr
/% the
government submitted a >e#urit/ Maws Amendment Bi,, to Par,iament% whi#h was to am
nd at
,east 22 ,aws in the #ountr/ aimed at giving the ee#utive bran#h more *ower in dea,ing wi
h these
#ha,,enges he bi,, was *assed on 1& De#ember 201$ in Par,iament a)ter a #haoti# *ar,iam
entar/
session and *rotest b/ a#tivists outside Par,iament% with the o**osition members o) Par,ia
ment
warning that Ken/a was be#oming a *o,i#e state 4n ebruar/ 2015% the onstitutiona, ourtthrew
out a number o) #,auses in the new ,aw as un#onstitutiona,% and the government was #onsi
ering
an a**ea,
>o#ia, #ontet and human deve,o*ment
UILDING HUMAN RESOURCES
Ken/a has made signi'#ant strides in a#hieving universa, *rimar/ edu#ation
he net
enro,ment ratio in#reased )rom +!&" in 2000 to @5@" in 2013% whi,e the gross enro,menratio
in 2013 amounted to 11!3" in#,uding *ersons over 1$ /ears o,d who are enro,,ed in
rimar/
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s#hoo,s he *ro*ortion o) *u*i,s starting Grade 1 who were ab,e to rea#h the ,ast grade o) *
rimar/
s#hoo, in#reased )rom 5!!" in 2000 to &03" in 2013 hese a#hievements #an be attri
uted to
the government.s )ree *rimar/ edu#ation *rogramme introdu#ed in 2003 and its sub
tantia,
investment in edu#ation at a, , ,eve,s Ken/a is we,, on tra#- to a#hieve DG 2 a#hieve un
versa,
*rimar/ edu#ation b/ 2015
About 52" o) Ken/a.s *o*u,ation has a##ess to basi# hea,th#are servi#es within 5 -m A
##ess
to basi# *rimar/ hea,th#are and re)erra, servi#es remains% however% a #ha,,enge B/ 2
013% the
in)ant morta,it/ rate in Ken/a had )a,,en to $& *er one thousand ,ive births )rom +!
n 2000
h e under7've morta,it/ rate stood at !1 *er one thousand ,ive births in 2013 versu
110 in
2000 Amongst the main )a#tors #ontributing to #hi,d and in)ant morta,it/ in Ken/a ar
a#ute
res*irator/ in)e#tionsF*neumonia% diarrhoea% ma,aria and 4FA4D>
aterna, morta,it/ #ontinues to be a serious deve,o*ment #ha,,enge in Ken/a at both na
ona,and #ount/ ,eve,s Ken/a.s materna, morta,it/ rate is *,a#ed at $00 *er one hundred thousa
nd ,ive
births in 2013 i)teen o) Ken/a.s $! #ounties have been )ound to a##ount )or @&!" o) the na
tiona,
tota, o) materna, deaths 4n 201$% the governors o) these #ounties signed a #ommitment t
o end
*reventab,e materna, and new7born.s deaths in their #ounties
he 4FA4D> *reva,en#e rate de#,ined )rom over 10" in 1@@@ to 5+" in 2012 whi,e 4
A4D>
*reva,en#e amongst the 1572$ age grou* de#,ined to 21" in 2013 )rom 3+" in 2003 ith
nitedNations
su**ort%
Ken/a
*re*ared
in
201$
the
DG
A##e,eration
ramewor-%
whi#h
)o#us
ed on
the rea,isation o) DGs $ redu#e #hi,d morta,it/ and 5 im*rove materna, hea,th 4n add
tion%
Ken/a.s 'rst ,ad/ ,aun#hed the Be/ond ero am*aign to )o#us on materna, and #hi,d hea,t
h% and
4 4n addition% Ken/a is now ran-ed 1+th amongst #ountries with the highest B burden
h e
B in#iden#e rose )rom 112 *er one hundred thousand in 1@@0 to 3$1 *er one hundred thou
sand
in 2013 Otherwise% the *ro*ortion o) #hi,dren ,ess than 5 /ears o,d s,ee*ing under inse#t
#ide7
treated bed nets in#reased )rom 2@" in 2000 to $22" in 2011% ,eading to a redu#tion in m
a,aria7
re,ated deaths
© AfDB,OECD,UNDP2015 AfricanEconomicOutlook 11
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urthermore% the *ervasive *er#e*tion o) e#onomi# and *o,iti#a, margina,isation emerged
)rom the #on#entration o) *ower in the hands o) a )ew e,ite grou*s sin#e inde*enden#e A##o
rding
to an 4n#,usive Growth >tud/ b/ >A4D 2013% issues o) *o,iti#a, governan#e have been am
ongstthe
most
*rominent
)eatures
o)
the
Ken/an
,ands#a*e
over
the
*ast
)ew
de#ades
stori#a,
under,/ing *o,iti#a, tensions% re#urrent,/ de'ned a,ong ethni# ,ines and e*ressed t
hrough
#orru*t a#tivities )avouring members o) the sitting ,eadershi*.s ethni# grou*% #reat
ed and
#ontinue to #reate a strong *er#e*tion o) a higherQris- environment 4n addition% there has
been a
#,ear #orre,ation between ma8or *o,iti#a,,/ re,ated events and signi'#ant disru*tion o) e#on
omi#
growth
he
>A4D
stud/
a,so
estab,ished
signi'#ant
de'#ien#ies
in
nonQurban
in)rastr
u#ture%
*arti#u,ar,/ with regard to the su**,/ o) e,e#tri#it/% *reventing the e*ansion o) e#onomi# a
#tivit/
outside o) the #a*ita, Ken/a *er)ormed *oor,/ in su**,/ing e,e#tri#it/ outside o) ,arge
urban
#entres or eam*,e% at 3@ Fmi,,ion *ersons in 2011% e,e#tri#it/ #onne#tion was high w
ithin
Nairobi +@" in 2011% whi,e a ,ow nationwide #onne#tivit/ rate 1+" in 200@ suggested a ve
r/ ,ow
rura, #onne#tivit/ rate estimated at rough,/ $" hi,e su#h a ,ow nonQurban #onne#tivit
rate
ea#ts a ,eve, o) hardshi* on househo,ds% more im*ortant,/ it re*resents a severe geogra*hi#a,
restri#tion o) e#onomi# a#tivit/ to a ver/ sma,, hand)u, o) #ities
argina,isation a,so emerges )rom investib,e resour#es A,though there is good eviden
e o)
'nan#ia,7se#tor dee*ening in Ken/a% the deve,o*ment o) the 'nan#ia, se#tor in the #ountr/
does
not seem to have s*read a#ross a, , e#onomi# se#tors hi,e the agri#u,ture se#tor #ontribut
es 2@"
to GDP and em*,o/s over &0" o) the rura, *o*u,ation% #ommer#ia, #redit to agri#u,ture re
mains
,ow% with #ommer#ia,7ban- #redit to this se#tor averaging a**roimate,/ 5" in the 'v
e
/ears
,eading to 2013
Deve,o*ment in Ken/a has ,arge,/ been #on#entrated in the west7east #orridor stra
dd,ing
the northern #orridor ,in-ing the *ort #it/ o) ombasa to the western *art o) Ken/a About
two7
thirds o) the #ountr/% #overing northern and eastern *arts% and to some etent the s
uthern
*arts% remain underdeve,o*ed% ,arge,/ o##u*ied b/ nomadi# *astora,ists
>*atia, tensions or #on6i#ts have% sin#e 1@@0% ,arge,/ resu,ted )rom the *er#e*tion o) e#o
nomi#and *o,iti#a, dominan#e% and ,and ownershi* he 'rst ma8or #on6i#t resu,ting )rom *o,iti#a
and
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ethni# tensions o##urred in the *eriod *re#eding the De#ember 1@@2 genera, e,e#tions%
eading
to dis*,a#ement o) *o*u,ations )rom severa, distri#ts in the ;i)t a,,e/ A ,arger #on6i#t o##
urred
a)ter the 200! genera, e,e#tions ,eading to the deaths o) over 1 200 *ersons and the dis*,a#
ement
o) more than +00 000 *ersons% *rin#i*a,,/ )rom the ;i)t a,,e/ and #oasta, regions Betwee
2012
and 201$% #on6i#t has been #on'ned to the northern% north7eastern and #oasta, regions%
main,/
asso#iated with #on6i#t over ,and% *asture% water% as we,, as terrorist a#tivities ,ed b/ A,7>habaab
Mimited #on6i#t has been witnessed in the ,arge #ities o) Nairobi and ombasa% and
these
have been ,arge,/ asso#iated with the i,,ega, o##u*ation o) *rivate ,and b/ s(uatters and *e
#eived
#orru*t a#(uisition o) ,and >imi,ar,/% the re#ent dis#over/ o) oi,% gas% a(ui)er and #oa,
has ,ed
to tensions and a#tive debate on how the revenue generated )rom the new dis#overies
wi,, be
shared
>in#e 1@@0% Ken/a has gone through *o,iti#a, and e#onomi# reorganisation intended to address
*er#eived histori#a, in8usti#es asso#iated with sharing o) resour#es 4n 1@@2% the administ
ative
boundaries were organised around $1 distri#ts and & *rovin#es Ea#h o) the distri#
s were
em*owered to *re*are and im*,ement their own Distri#t Deve,o*ment P,ans% with res
our#es
*,anned and a,,o#ated b/ the nationa, government A,though most distri#ts were de,i
neated
a,ong ethni# ,ines% the ,o#a, *,anning and *o,iti#a, mobi,isation ,ed to some )ee,ing o) in#,us
on in
the management o) nationa, deve,o*mentBetween 1@@2 and 2010% the re)orm drive #ontinued to the ado*tion and *romu,gation o)
a new
#onstitution in August 2010% ,arge,/ meant to address e#onomi# and *o,iti#a, margina,i
ation
© AfDB,OECD,UNDP2015 AfricanEconomicOutlook 13
he #onstitution estab,ished two ,a/ers o) government% nationa, and $! semi7autonomous
#ount/ governments #harged with *,anning% ,egis,ation and the im*,ementation o) autonomous
budgets he nationa, government is ob,iged to a,,o#ate the e(uiva,ent o) at ,east 15" o) the ,atest
audited a##ounts to the annua, budgets o) the #ount/ governments he #onstitution addresses
margina,isation through a=rmative a#tion *rogrammes and *o,i#ies that are designed to redress
an/ histori#a, disadvantages he 2010 onstitution de'nes margina,ised #ommunities as one or
more o) the )o,,owing9 i) a #ommunit/ that
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traditiona, ,i)est/,e and ,ive,ihood based on a hunter or gatherer e#onom/% or *astora, *ersons
and #ommunities% whether the/ are nomadi# or a sett,ed #ommunit/% that
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4 AfricanEconomicOutlook © AfDB,OECD,UNDP2015