Continued Rebound, but Storms Cloud the Horizon Policies to Accelerate the Productive Economy for Inclusive Growth © 2022. World Bank Group This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. 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TABLE OF CONTENTS ABBREVIATIONS .................................................................................................................................................................................................................................................................... i ACKNOWLEDGEMENTS.................................................................................................................................................................................................................................................... ii EXECUTIVE SUMMARY...................................................................................................................................................................................................................................................... iii THE STATE OF KENYA’S ECONOMY 1. Recent Economic Developments and Outlook .......................................................................................................................................................................................... 2 1.1. Global and regional growth continues to weaken amid disruptions in oil and gas flows, tightening financial conditions, Covid restrictions in China, and the worst regional drought in decades......................................................................................................................... 2 1.2. The economic rebound in Kenya continues though signs of weakening have appeared .................................................................................. 2 1.3. The current account deficit widened, driven by global commodity markets shocks ............................................................................................. 4 1.4. Monetary policy has been tightened in response to persistent inflation pressures ................................................................................................ 5 1.5. The government reduced the fiscal deficit through increased revenue collection.................................................................................................. 8 2. Outlook and Risks.............................................................................................................................................................................................................................................................................. 10 2.1. GDP growth is expected to remain above pre-pandemic average in the medium term...................................................................................... 10 2.2. Downside risks continue to dominate................................................................................................................................................................................................... 12 SPECIAL FOCUS 3. Policy Options to Support Economic Transformation and Economic Empowerment for Inclusive Growth............................................................ 14 3.1. Policies to transform the agriculture sector in Kenya.................................................................................................................................................................... 14 3.2. Policies to accelerate Kenya’s digital economy: ............................................................................................................................................................................... 18 3.3. Policies to strengthen social protection to improve living standards and support the most vulnerable segments of the society 21 LIST OF TABLES Table 1: Kenya- Summary of fiscal operations (percent of GDP)............................................................................................................................................................... 10 Table 2: Medium-term outlook....................................................................................................................................................................................................................................... 12 Table 3: Yields for major crops in Kenya..................................................................................................................................................................................................................... 14 LIST OF FIGURES Figure 1: Services continue to lead the rebound (contributions to real GDP y/y growth, percentage points)............................................................ 2 Figure 2: Hotel employment has recovered but remain below pre-COVID levels.......................................................................................................................... 3 Figure 3: The PMI recovered sharply following a smooth transition of power.................................................................................................................................. 3 Figure 4: Tourists’ arrival has been on the rise, but election concerns reduced the inflow in August 2022 ................................................................... 4 Figure 5: Foreign portfolio investment contracted as global financial conditions tightened ................................................................................................ 4 Figure 6: The Kenya shilling continues its depreciation against the US dollar................................................................................................................................... 4 Figure 7: Inflation topped the CBK’s target ............................................................................................................................................................................................................ 5 Figure 8: Food inflation led the surge in inflation [contributions to overall inflation rate]......................................................................................................... 5 Figure 9: The government reduced its fiscal deficit............................................................................................................................................................................................ 8 Figure 10: Reduction in tax expenditure and improved tax compliance supported revenue performance ................................................................ 8 Figure 11: Prudent debt management has moderated the pace of debt accumulation........................................................................................................... 9 LIST OF BOXES Box 1: How inflation and climate shocks affect the welfare of Kenya’s households ............................................................................................. ����������������������� 6 References.................................................................................................................................................................................................................................................................................. 24 Annex Tables ............................................................................................................................................................................................................................................................................ 25 ABBREVIATIONS ASALs Arid and Semi-Arid Lands ASTGS Agricultural Sector Transformation and Growth Strategy CBK Central Bank of Kenya CGIAR Consultative Group on International Agricultural Research COMESA Common Market for East and Southern Africa COMEX Commodity Exchange COVID Corona Virus Disease CPI Consumer Price Index DLP Digital Literacy Program EAC East Africa Community EMDE Emerging Markets and Developing Economies ESR Enhanced Single Registry FDI Foreign Direct Investments FLID Farmer Led Irrigation Development FY Fiscal Year GDP Gross Domestic Product H1 First Half HSNP Hunger Safety Nets Program ICTA Information Communication and Technology Authority KALRO Kenya Agriculture and Livestock Research Organization KRA Kenya Revenue Authority KYEOP Kenya Youth Employment and Opportunities Program MSME Micro, Small and Medium Enterprises NICHE Nutrition Improvements through Cash and Health Education NOFBI National Optic Fiber Backbone Infrastructure NSSF National Social Security Fund OPDC Office of the Data Protection Commissioner PMI Purchasing Managers- Index Q1 First Quarter Q3 Third Quarter SP Social Protection TVET Technical and Vocational Education and Training VAT Value Added Tax VTDP Voluntary Tax Disclosure Program y/y Year-on-Year December 2022 | Edition No. 26 i ACKNOWLEDGEMENTS The Kenya Economic Update (KEU) is a World Bank report series produced twice a year. It assesses recent economic and social developments and prospects in Kenya, and places them in a longer-term and global context. Through special topics, the KEU also examines selected policy issues and medium-term development challenges in Kenya. It is intended for a wide audience, including policymakers, business leaders, financial market participants, and the community of analysts and professionals engaged in Kenya’s changing economy. KEU’s production is led by the Macroeconomics, Trade and Investment (MTI) Global Practice team for Kenya. Part 1 (Recent Economic Developments and Outlook) was produced by Naomi Mathenge, Tasneem Alam Ghauri, and Angélique Umutesi (all MTI) with inputs from Alastair Haynes. Part 2 (special topic on policy notes) has three sections. James Musinga and Vinay Vutukuru produced the agriculture section policy notes. Tim Kelly, Cecilia Guilford, Caroline Koech and Zoya Ajani produced policy notes for the digital economy section. Thomas Bowen and Yulia Smolyar produced policy notes for the social protection section. Anne Khatimba provided logistical support, Vera Rosauer managed communication and dissemination, and Robert Waiharo designed the report. The report benefited from peer reviews by Kemoh Mansaray, Jennifer Gui, Hardwick Tchale, Boban Varghese, and Tom Bundervoet. The report was prepared under the overall guidance of Vivek Suri (Practice Manager, Macroeconomics, Trade and Investment), Paolo Belli (Practice Manager, Practice Manager, Social protection and Jobs, Eastern and Southern Africa), Philip Schuler (Lead Economist, Macroeconomics, Trade and Investment), Allen Dennis (Program Leader for Kenya, Rwanda, Uganda, Somalia), Keith Hansen (Country Director for Kenya, Rwanda, Uganda, Somalia) and Camille Lampart Nuamah (Manager, Operations for Kenya). The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. For questions about this report please email nmathenge@worldbank.org. For information about the World Bank and its activities in Kenya, please visit: https://www.worldbank.org/en/country/kenya ii December 2022 | Edition No. 26 EXECUTIVE SUMMARY Kenya’s rebound from the pandemic continued in 2022. to 9.6 percent in October 2022, the highest since December Driven by broad-based increases in services and industry, 2017, before falling marginally to 9.5 percent in November real Gross Domestic Product (GDP) increased by 6.0 percent 2022, even as price increases were partially muted by Year-on-Year (y/y) in the first half (H1) of 2022. However, government subsidies on fuel, electricity, and maize. High the agriculture sector contracted by 1.5 percent during the frequency monitoring of households shows a rise in food same period, and with the sector contributing almost one- insecurity, most severely in rural areas, and over half of fifth of GDP, its poor performance pulled back GDP growth households reduced their food consumption in June 2022. by 0.3 percentage points. Notwithstanding the strong y/y Further, most households reported an increase in prices increases, GDP has seen a marked sequential slowdown of essential food items and over half of rural households since the 2021 third quarter (Q3) as base effect dissipated reported being unable to access core staple food such as and business confidence weakened because of the global beans or maize. In response to the inflationary pressures, commodity market shock, a long regional drought and the Central Bank of Kenya (CBK) has raised the policy rate domestic political uncertainty in the run up to the August twice since May 2022 by a cumulative 125 basis points to 2022 general elections. Business confidence however reach 8.25 percent. picked up in the wake of a smooth transition of power following a largely peaceful presidential election. Kenya’s The government reduced the budget deficit in fiscal growth prospects remain bright; however, emerging year (FY)2021/22 through revenue measures and shocks are challenging the broad-based rebound. The expenditure moderation. Total revenue increased to baseline assumes robust growth of credit to private sector, 17.3 percent of GDP in FY2021/22 from 15.7 percent in contained COVID-19 infections, and high commodity prices FY2020/21, reflecting a reduction in tax expenditures favorable for Kenyan exports to boost Kenya’s growth in the through harmonization of exemptions tax, enhanced tax medium term. However, the ongoing shocks, including the compliance through voluntary tax disclosure program to long drought in arid and semi-arid areas, rising inflation, collect previously undeclared tax, and technologies to plug and tighter global financial conditions, create challenges loopholes for corruption and easing access to the Kenya for Kenya to sustain its recovery. Revenue Authority (KRA) web system, improvements in tax administration, and the pick-up in domestic demand. Notwithstanding the global and domestic shocks, Spending related to COVID-19 has gradually declined, but economic growth is expected to remain above pre- the government introduced subsidies in FY2021/22 as the pandemic average in the medium term. GDP is projected economy experienced a drought and rising food and fuel to grow by 5.2 percent on average in 2023–24. Private prices. Spending on the health sector, which had increased investments are expected to drive economic growth in due to COVID-19 pandemic (1.0 percent of GDP in the medium term amid sluggish growth in households’ FY2019/20 and 0.8 percent of GDP in FY2020/21), declined consumption. The ongoing favorable trends in the to 0.6 percent of GDP in FY2021/22 following low infections, underlying drivers of Kenya’s recent consumption growth with priority spending focused on vaccination programs. are expected to continue including the recovery in employment in the services sector (especially in tourism), The Government of Kenya has laid out an economic resilient diaspora remittances, and increase in minimum transformation agenda focused on economic monthly wage. However, consumption growth is likely empowerment of the population at the bottom of the to be dampened in the near term due to below average pyramid. This is aimed at promoting inclusive growth agricultural harvest, high inflation affecting real incomes, which is key for shared prosperity. To drive the agenda, the and tighter monetary policy. government has identified five sectors as the core pillars of the plan namely agriculture; Micro, Small and Medium Monetary policy has been tightened in response to Enterprises (MSME); housing and settlement; healthcare persistent inflation pressures following shocks from and the digital superhighway and creative economy. The global commodity markets and the regional drought. rising cost of living, climate change shocks, and spending Headline inflation started to accelerate from 5.1 percent y/y pressures to reduce the high cost of living amid limited in February 2022 and has remained above the CBK’s upper fiscal space are some of the immediate challenges facing bound target of 7.5 percent since June 2022. Inflation rose the government. There is therefore need to prioritize December 2022 | Edition No. 26 iii Executive Summary policy options to support economic empowerment and of Kenya’s inclusive growth agenda. While the country promote shared prosperity. In this edition of the KEU, the has made impressive gains, there remains a lingering special focus section delves into policy priorities that are digital divide in access to broadband services, digital public at the forefront of advancing the economic transformation services and the capabilities needed for individuals and agenda in agriculture and the digital economy, and businesses to thrive in an increasingly digitized economy identifies policies to support the most vulnerable in the and society. Policy options could focus on the need to society through social protection. expand access to broadband to increase digital inclusion to ensure that all Kenyans benefit from the digital economy; The agriculture sector is central to GDP growth, increase the efficiency of government service delivery employment and poverty reduction, but productivity through digitization to enable government to better growth and value addition of the sector have been utilize digital technologies and enhanced connectivity to elusive. Less than 5 percent of Kenyan agriculture is improve public service delivery and support public sector irrigated, and the sector has suffered from increasing modernization, innovation, and resilience; increasing variability in rainfall. Climate change poses an additional and improving access to digital skills and jobs as well as challenge to the prospects of the sector putting agricultural advancing legislation and standards to enhance regional production and food security at risk through its impacts on digital market integration. water availability and seasonality, soil erosion, and changes in the distribution, incidence and intensity of animal and Policies to strengthen the social protection systems plant pests and diseases. can be integral levers for supporting inclusive growth, providing support directly to those at the bottom of Kenya’s Agricultural Sector Transformation and Growth the pyramid. Spending on social assistance programs is Strategy (ASTGS), 2019-29, provides a roadmap to very low compared to the upper middle income country increase sector’s productivity. It aims to: (i) raise small- average, which Kenya aspires to become. For social scale farmer incomes through farmer-facing enterprises protection to be able to have a meaningful role in the that provide inputs, equipment, processing, and post- inclusive growth process, its potential will need to be harvest aggregation; (ii) increase output and value-added realized through increased expenditure that translates through large private firms and large scale agro-processing into increased coverage among the poor and vulnerable hubs; and (iii) boost household food resilience through and more adequate benefit transfer values, which are community-driven interventions in pastoralism and fishing critical to enhancing the poverty alleviation outcomes. in arid and semi-arid lands. This is founded on the need Increased expenditure could become more sustainable for inclusion, growth and commercialization and building if private sources of financing are integrated into the climate resilience and adopting climate smart agriculture social protection financing model and if the National for sustainable growth. Social Security Fund (NSSF) Act is amended to allow higher contributions while enforcing stricter regulation Policies to accelerate Kenya’s digital economy are of administrative costs and facilitating better returns on pegged on the fact that digital transformation is a driver pension savings. iv December 2022 | Edition No. 26 The State of Kenya’s Economy Photo: © International Livestock Research Institute (ILRI) The State of Kenya’s Economy 1. Recent Economic Developments and Outlook 1.1. Global and regional growth continues to Economic activity in sub-Saharan Africa is slowing amid weaken amid disruptions in oil and gas global and regional economic headwinds. The sub- flows, tightening financial conditions, Saharan African economy is experiencing shocks from the Covid restrictions in China, and the worst regional drought in decades slowing down of the global economy, tightening global financial conditions, elevated inflation driven by rising Global sentiment deteriorated in 2022, raising fears food and fuel prices, and rising risk of debt distress. Adverse of a global economic recession. The Russian invasion weather conditions, particularly across the Horn of Africa, of Ukraine and subsequent sanctions disrupted world have exacerbated inflationary pressures caused by global markets, most notably through sharply raising global supply chain disruptions and the war in Ukraine. East Africa commodity prices. With energy supplies to Europe severely is experiencing the worst drought in four decades and disrupted, the benchmark price of natural gas delivered bracing for its fifth consecutive failed rainy season, with to Europe soared to $70.0/mmbtu in August 2022, up close to 20 million people facing starvation. Faced with more than four-fold since 2021. To prevent inflation mounting inflationary pressures and fears of large capital from becoming entrenched, central banks - especially of outflows associated with widening spreads, central banks the advanced economies - are aggressively tightening across the region have raised policy rates. Economic growth monetary policy. GDP growth in China has slowed at a sharp in sub-Saharan Africa is expected to slow from 4.1 percent rate, reflecting COVID- 19 lockdowns and the deepening in 2021 to 3.3 percent in 2022, a downward revision of 0.3 real estate crisis, with major global spillovers. Global percentage point from the April 2022 forecast.2 business activity, as measured by the JP Morgan global composite Purchasing Managers’ Index (PMI), contracted 1.2. The economic rebound in Kenya for a second consecutive month in September 2022 while continues though signs of weakening global investor confidence has plummeted amid concerns have appeared over the global macroeconomic environment and central Kenya’s rebound from the pandemic continued in 2022. banks’ aggressive policy tightening. The combination of Partly reflecting a base effect, real GDP increased by 7.5 slow growth and tightening financial conditions amid percent in 2021 and 6.0 percent y/y in H1-2022, driven by high levels of debt is leading to fiscal pressures and weak broad-based increases in services and industry (Figure 1). investment in many Emerging Markets and Developing This was supported by a pickup in private sector credit, Economies (EMDE) countries. The World Bank’s baseline lower COVID-19 infections, and a recovery in tourism. forecast is for global growth to slow from 5.7 percent last Notwithstanding the strong y/y increases, GDP has seen a year to 2.9 percent in 2022, 1.2 percentage points lower marked sequential slowdown since Q3-2021 as base effect than the January 2022 forecast.1 dissipated and business confidence weakened because Figure 1: Services continue to lead the rebound (contributions of the global commodity market shock, a long regional to real GDP y/y growth, percentage points) drought and domestic political uncertainty in the run up Agriculture Industry Services Taxes GDP growth to the August 2022 general elections. Business confidence 10 picked up in the wake of a smooth transition of power following a largely peaceful presidential election. On the 6 demand side, the rebound in H1-2022 was driven by Percentage points 2 resilient consumption growth, underpinned by buoyant international remittances, increase in minimum monthly -2 wage, and large fiscal subsidies to cushion from the regional drought and global commodities market shocks. -6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Investment likely remained subdued in H1-2022 due to 2019 2020 2021 2022 pre-election uncertainties but is expected to pick up in H2- Source: Kenya National Bureau of Statistics and World Bank staff calculations 2022 on the back of improved business confidence. 1 World Bank, Global Economic Prospects, June 2022. 2 World Bank, Africa’s Pulse, October 2022. 2 December 2022 | Edition No. 26 The State of Kenya’s Economy Services maintained the strong broad-based increase, high frequency data point to a recovery in business led by continued recovery in tourism. Following a strong activities following a peaceful general election in August rebound of 9.8 percent y/y in 2021, services sector value- 2022. The Purchasing Managers’ Index (PMI) reversed to an added increased by 8.4 percent y/y in the first half of 2022 expansion in September 2022 after recording successive and is expected to grow by 7.9 percent in 2022. While all contractions in activity from April 2022 through August sub-sectors posted positive y/y growths in H1-2022, the 2022. Nonetheless, the CBK’s monetary tightening and rebound was particularly strong in hotels and restaurants, rationalization of government’s development spending is which rose by 36.7 percent y/y and reflected ongoing expected to weigh on industrial activities, keeping sector’s recovery in tourism. A Central Bank of Kenya (CBK) survey growth at 4.9 percent in 2022. of hotels conducted in mid-May 2022 showed that two key hotels that had closed two years ago reopened between The long drought has led to a contraction in agriculture April and May 2022 while average bed occupancy and output, underlining the vulnerability to climate-related conference services had risen to above pre-COVID levels. risks and the need to increase resilience to climate However, employment in the sector stayed at 83 percent change. The greater Horn of Africa is suffering from its of the pre-COVID-19 levels (Figure 2). 3 longest drought in four decades as most parts of the region brace for a fifth consecutive failed rainy season. The industrial sector staged a recovery, but rising Kenya’s agriculture sector contracted by 1.5 percent y/y economic uncertainty softened economic activity in in the first half of 2022, and with the sector contributing the sector. Industrial output increased by 4.6 percent almost one-fifth of GDP, the sector’s poor performance y/y in the first six months of 2022, supported by mobility pulled back GDP growth by 0.3 percentage points. The normalization enabled by low COVID-19 infections and the drought adversely affected outputs of the crops and policy focus on infrastructure and affordable housing as livestock sub-sectors in the first half of 2022, which in turn illustrated by rising real value of building plans approved by reflected in dismal performance of Kenya’s key commodity the Nairobi City County (in the first six months of 2022, the exports including tea and horticulture. During H1-2022, real value was nearly 50 percent higher than that of 2021). production of tea decreased by 1.4 percent y/y while Supported by government spending on infrastructure milk intake by processors fell by 1.7 percent y/y to 389.3 projects, growth in the construction sub-sector remained million liters. With poor short (October-December) rains robust at 6.1 percent y/y in H1 2022, contributing 0.3 projected for much of the eastern part of the country, the percentage points to the H1 GDP growth. The growth in agriculture sector is expected to contract by 1.6 percent in manufacturing value-added decelerated to 3.6 percent y/y 2022. The July assessment of long rains indicated that the in H1 2022 from 6.5 percent y/y in the same period last drought has left 3.5 million people food insecure in Kenya, year, reflecting the impacts of global slowdown, rising a 13 percent increase since the February assessment.4 The inflation and pre-election economic uncertainty. However, severe drought crippling north-eastern Kenya has driven Figure 2: Hotel employment has recovered but remain below Figure 3: The PMI recovered sharply following a smooth pre-COVID levels transition of power 100 70 Number of employees relative to Feb 2020 90 60 80 > 50 indicates an expansion PMI Index 70 50 60 < 50 indicates contraction 50 40 40 30 30 Apr-20 Jun-20 Oct-20 Apr-21 Jun-21 Oct-21 Apr-22 Feb-20 Feb-21 Feb-22 Dec-20 Dec-21 Aug-20 Aug-21 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Source: Central Bank of Kenya, MPC Hotels Survey Source: CFC Stanbic and World Bank 3 Central Bank of Kenya, Monetary Policy Committee Hotels Survey, May 2022. 4 Government of Kenya, ‘The 2022 Long Rains Season Assessment Report’, July 2022. December 2022 | Edition No. 26 3 The State of Kenya’s Economy the number of children facing acute malnutrition up by 17 Figure 5: Foreign portfolio investment contracted as global financial conditions tightened percent between February 2022 and July 2022 to nearly Foreign Direct Investment Portfolio Investment 900,000 with fears this will rise further if forecasts for another Other investments Capital & Financial Acoount failed rainy season prove to be accurate. Addressing the 8 challenges of climate change is key to achieving food security and sustainable agriculture. 4 Percent of GDP 1.3. The current account deficit widened, driven by global commodity markets 0 shocks Despite steady remittances inflows and the recovery in tourism, the current account deficit increased as surging -4 2018 2019 2020 2021 Aug-22 commodity prices pushed imports to an all-time high. Source: Central Bank of Kenya The substantial increase in global prices for oil and other commodities pushed import payments to US$25.0 billion net inflows in the capital and financial accounts reduced in the year to August 2022, with oil import swelling by 85.7 to 5.4 percent of GDP in August 2022 from 6.3 percent percent y/y. Services receipts improved as international in December 2021. This reflected 0.8 percent of GDP visitors’ arrivals to Kenya continued to increase during most outflow in portfolio investment (compared to average of 2022, rising to 124,928 persons in July 2022 from 69,932 net inflows of 0.1 percent of GDP recorded between in January 2022 (Figure 4). However, this is still about 21 June 2021 to May 2022) as international investors rushed percent lower than the pre-pandemic level recorded in towards safe-haven assets such as the US dollar in July 2019. Remittances remained resilient, increasing by response to rising uncertainty and aggressive monetary 13.5 percent y/y to reach $4,019 million in the year to tightening by the Federal Reserve (Figure 5). Though August 2022. However, these developments were not the CBK’s reserves of external assets remain above the sufficient to offset the impacts of the large commodity statutory requirement of 4.0 months of import cover, price shock, leading the current account deficit to widen these have consistently declined since June 2021. As at to US$6.3 billion in the year to August 2022 from US$5.5 October 6, 2022, official usable foreign exchange reserves billion in the same period last year. The current account stood at U$7,321 million (4.1 months of import cover) deficit is projected to increase to 6.0 percent of the GDP by compared to U$9,957.4 (6.1 months of import cover) end of 2022 as the anticipated sharp economic slowdown in June 2021. With accelerating imports and gradual in North America and Europe dents remittances growth erosion of foreign exchange reserves, the shilling has and the continued war in Ukraine keeps global energy remained under pressure (depreciating by 6.4 percent prices elevated. against the U.S. dollar between end December 2021 and October 6, 2022) (Figure 6). This has put an upward Financial inflows have declined signaling tightened pressure on debt service as 68 percent of the external global financing conditions. Over a 12-month period, debt is denominated in U.S. dollars. Figure 4: Tourists’ arrival has been on the rise, but election Figure 6: The Kenya shilling continues its depreciation against concerns reduced the inflow in August 2022 the US dollar 180 Ksh / US$ Ksh / Pound Sterling Ksh / Euro 160 160 Number of Tourist arrivals '000 140 150 120 140 100 130 80 120 60 110 40 20 100 0 90 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Apr-21 Feb-20 Apr-20 Oct-20 Dec-20 Feb-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Jun-19 Aug-19 Oct-19 Dec-19 Jun-20 Aug-20 Source: Kenya National Bureau of Statistics and World Bank staff calculations Source: Central Bank of Kenya 4 December 2022 | Edition No. 26 The State of Kenya’s Economy 1.4. Monetary policy has been tightened in response, the government announced a subsidy on maize response to persistent inflation pressures meal in July 2022 (that lasted for a month), and suspended Shocks from global commodity markets and the the railway development levy and import declaration regional drought pushed up inflation in 2022. The war fee on imported maize. Maize flour was subsidized from in Ukraine and the long drought in East Africa have put KSh 205 for a 2kg packet to KSh 105. The government upward pressures on food and fuel prices since early has been subsidizing fuel prices, with fuel subsidies rising 2022. Headline inflation started to accelerate from 5.1 to the equivalent of 0.5 percent of GDP in FY2021/22. In percent y/y in February 2022 and has remained above September 2022, the government removed subsidy on the CBK’s upper bound target of 7.5 percent since June petrol and plans to gradually withdraw subsidies on diesel 2022. Inflation rose to 9.6 percent in October 2022, the and kerosene. The subsidization of maize and fuels has highest since December 2017, before falling marginally helped to reduce inflation pressure from higher global to 9.5 percent in November 2022, even as price increases commodity prices but at a significant fiscal cost (as will be were partially muted by government subsidies on fuel, discussed below). electricity and maize. Food, comprising one-third in the Consumer Price Index (CPI) basket, recorded significant The Central Bank of Kenya (CBK) has been tightening increases in prices, contributing about sixty percent to the monetary policy to manage rising inflation. Since increase in headline inflation since February 2022. Energy May 2022, the CBK has raised the policy rate twice by a and core (which excludes food and energy prices) inflation cumulative 125 basis points to reach 8.25 percent. The have also trended upwards, reflecting partial pass-through latest increase was announced on September 29, 2022, of higher international oil prices, Shilling depreciation, when the Monetary Policy Committee (MPC) decided to and second-round effects of supply shocks. Products further raise the policy rate by 75 basis points in view of experiencing significant price increases in November 2022 sustained inflationary pressures and the elevated global included maize flour (32.2 percent y/y), sugar (23.2 percent risks and their potential impact on the domestic economy. y/y), beans (27.0 percent y/y), potatoes (37.2 percent y/y), However, with the June through September 2022 inflation cooking oil (18.8 percent y/y), diesel (46.1 percent y/y), rates accelerating to multi-year high levels, the real policy kerosene (39.3 percent y/y), and petrol (36.4 percent y/y). rate has remained negative since June 2022. The government has provided subsidies to mitigate the Credit to the private sector remained strong in the year impact of rising inflation. High frequency monitoring of to August 2022. Total credit to the private sector has been households shows a rise in food insecurity, most severely rising in double digits since March 2022, reaching 12.5 in rural areas, and over half of households reduced their percent in the year to August 2022, supported by strong food consumption in June 2022. Further, most households post-COVID economic recovery and low real lending rates reported an increase in prices of essential food items and despite CBK’s monetary tightening. The economic sectors over half of rural households reported being unable to contributing the most to private sector credit growth access core staple food such as beans or maize (see Box 1). In included trade, manufacturing and households. As noted Figure 8: Food inflation led the surge in inflation [contributions Figure 7: Inflation topped the CBK’s target to overall inflation rate] Overall in ation Core in ation Core In ation Housing, water, electricity, gas & other fuels + transport in ation 10 Food In ation Upper bound 10 8 8 6 Percent 6 Percent 4 2 4 Lower bound 0 2 May-20 May-21 May-22 Aug-20 Aug-21 Aug-22 Nov-20 Nov-21 Nov-22 Feb-20 Feb-21 Feb-22 0 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22 Nov-22 Source: Kenya National Bureau of Statistics and World Bank staff calculations Source: Kenya National Bureau of Statistics and World Bank staff calculations December 2022 | Edition No. 26 5 The State of Kenya’s Economy in part 2 of this report, there is need to expand credit to improvement to 14.2 percent in August 2022 as a result of core growth and climate-relevant sectors for sustained repayments and recoveries in the manufacturing, building economic growth. and construction, and transport and communication sectors. The parliament approved amendments to the Capital and liquidity buffers have kept the banking Central Bank of Kenya Act in December 2021, bringing the sector stable and resilient in 2022. As of end-June 2022, previously unregulated digital credit providers under the banks’ liquidity and capital adequacy ratios stood at 52.5 CBK’s regulatory ambit. This is a major policy reform that percent and 18.9 percent respectively, well above the will strengthen consumer protection and support the statutory requirements. The gross non-performing loans government's Anti-Money Laundering and Combating the (NPLs) ratio increased from 13.1 percent in December 2021 Financing of Terrorism (AML/CFT) efforts. to 14.7 percent in June 2022 and remains high despite slight Box 1: How inflation and climate shocks affect the welfare of Kenya’s households5 Kenyan households continue to be affected by inflation and climate shocks. In the first half of 2022, Kenyan households were exposed to sharp increases in food, fuel and input prices as well as the worst drought in the Horn of Africa in over 40 years.6 To monitor households’ responses to inflation and climate shocks, the World Bank conducted the eighth round of the Rapid Response Phone Survey. The initial survey monitored households’ responses, coping strategies and food security during the COVID-19 pandemic, but has since been adjusted to capture inflationary pressures and climate shocks. Half the households had to cut back consumption. Just Figure B1-1: Coping strategies by location under 95 percent of households used at least one strategy to Urban area Rural area cope in June 2022. Close to half of households (52 percent) No action taken reduced food consumption and over a third (35 percent) Reduced food consumption reduced consumption of non-food items. 10 percent sold Reduced nonfood consumption Relied on savings productive assets (Figure B1-1). Regression analyses reveal that Selling assets agricultural households cutting consumption to cope with Additional income generating acitivity shocks were more likely to be households with young children Assistance from friends and family Puchased on credit and those headed by women. At the same time, living in an Took loan arid or semi-arid county does not predict using consumption- Government assistance based coping strategies when demographics are controlled Any other listed mechanism 0 10 20 30 40 50 60 70 for. These results suggest that household characteristics rather Percent of households than geographic location determines coping behavior. Food insecurity increased sharply. The share of Kenyan Figure B1-2: Went hungry due to lack of food (past 30 days) households with members going hungry in the past 30 days 80 Percent of households due to a lack of food jumped from one third in November 60 2021–March 2022 to more than a half in June 2022 (Figure 40 B1-2). Further, the share of households unable to access 20 staple foods increased to 49 percent, with higher rates for rural households (58 percent) and households in drought 0 May-Jun ‘20 Oct-Nov ‘20 Apr-May ‘20 Nov ‘21-Feb ’22 May-Jun ‘20 Oct-Nov ‘20 Apr-May ‘20 Nov ‘21-Feb ’22 May-Jun ‘20 Oct-Nov ‘20 Apr-May ‘20 Nov ‘21-Feb ’22 May-Jun ‘20 Oct-Nov ‘20 Apr-May ‘20 Nov ‘21-Feb ’22 May-Jun ‘20 Oct-Nov ‘20 Apr-May ‘20 Nov ‘21-Feb ’22 affected counties (67 percent). Most cited reasons include an increase in prices (89 percent) and a decrease in income (66 percent). As a result of food insecurity, child malnutrition, as expected, increased. National Drought Management All Rural Urban Non-ASAL ASAL Authority’s (NDMA) September 2022 report for example Overall Location County documents a rise in number of children at risk of malnutrition in a subset of arid and semi-arid (ASAL) counties.7 5 The survey is representative at the national level. More details on the survey methodology and questionnaires can be found here (https://www.worldbank.org/en/country/kenya/brief/ monitoring-covid-19-impact-on-households-and-firms-in-kenya). The data is publicly available on the World Bank microdata catalogue, here. (https://doi.org/10.48529/tch6-jx12) 6 The World Food Programme warns of up to 26 million people sliding into crisis-level food insecurity in the region by the end of 2022 (WFP and FAO, 2022). 7 National Drought Management Authority (NDMA) Early Warning Bulletin from September 2022. 6 December 2022 | Edition No. 26 The State of Kenya’s Economy Box 1: How inflation and climate shocks affect the welfare of Kenya’s households (cont.) Shocks have spurred the use of credit, particularly to purchase food. Some households resorted to taking out loans (12 percent) and making purchases on credit (34 percent) to protect consumption in the face of shocks. Informal networks also played a key role in dealing with the negative income Figure B1-3: Relied on credit to purchase food (last 30 days) shock, as 58 percent relied on friends and family for 80 assistance (Figure B1-1). Further, 60 percent of households 70 explicitly reported purchasing food on credit (Figure 60 B1-3). This share was higher among rural households 50 (62 percent), in ASAL counties (71 percent), and among Percent 40 the poorest quantile of households in terms of asset 30 ownership (70 percent). Households continue to rely on 20 borrowing, a trend that has persisted since the start of 10 the pandemic, especially through short-term borrowing 0 Urban ASAL Non- ASAL Rural All Q1 Q2 Q3 Q4 Q5 on mobile money platforms. This trend raises concerns 8 of increased indebtedness, especially given that half of Overall Location County Wealth quantiles Kenyans are unaware of the true cost of borrowing.9 Agricultural households are particularly vulnerable to climatic shocks, and although they take steps to mitigate the risk of climatic shocks, in some cases this may result in lower future incomes. 90 percent of households in ASAL counties and 43 percent in non-ASAL counties reported lower harvests than in the previous season, with droughts (47 percent) and the higher cost of supplies (30 percent) as the reason. One in four agricultural households experienced lower agricultural earnings compared to June 2021, with average earnings 38 percent lower. In response, 30 percent of households in non- ASAL counties planted less in June 2022 than in the previous planting season. In ASAL counties, the share increases to 38 percent, expediting a trend seen in previous waves (Figure B1-4). Amongst those who planted less, 69 percent cited the increased cost of supplies as the main reason and 54 percent cited risk of drought (Figure B1-5). Both reasons indicate that some agricultural households are cutting back investments in the face of climate risks. Figure B1-4: Planting amounts compared to previous planting Figure B1-5: Reasons for planting less season More Same Less 2% 1% 2% 8% 6% 9% 30% 38% Prices are lower 100 Lower produce due to oods 80 Percent of Households 69% Expects to sell less 60 80% 84% 72% 76% 82% 40 59% 48% Fearing locusts 20 Lower produce due to drought 29% 18% 15% 19% 15% 9% 10% 12% 0 Supplies/material more expensive Non-ASAL ASAL Non-ASAL ASAL Non-ASAL ASAL Non-ASAL ASAL 0 20 40 60 80 Apr -Jun '21 Jul-Oct '21 Nov '21 - Mar '22 Jun '22 Percent of households in planting season Continuous monitoring in the face of ongoing risks is necessary. Families living in rural non-ASAL counties depend on access to fertilizer and the long rains between March and May to secure agricultural production. However, fertilizer prices are predicted to remain high, while this year’s long rain season rainfall totals were 60 percent below the 40-year average which can reduce the effectiveness of available fertilizer.10 ASAL counties, on the other hand, have been affected by four consecutive seasons of drought. Water shortages may result in more livestock death and/or more selloffs depressing livestock prices.11 In the face of high food insecurity, the situation must be monitored closely to inform swift policy support. 8 Fuliza, Safaricom’s M-Pesa overdraft service, noted a record Sh. 1.58 billion daily transactions in November 2021. 9 The Central Bank of Kenya, FSD Kenya and the Kenya National Bureau of Statistics. FinAccess Household Survey, County perspective. November 2022 10 John Baffes and Wee Chian Koh (2022) for a prediction of fertilizer prices and Fews net (2022) for an estimation of rainfall totals for the long rain season 11 National Drought Early Warning Bulletin (September 2022). December 2022 | Edition No. 26 7 The State of Kenya’s Economy 1.5. The government reduced the fiscal deficit (VTDP) to collect previously undeclared tax and enjoy through increased revenue collection full or partial relief of penalties, and technologies to plug The government reduced the budget deficit in loopholes for corruption and easing access to the KRA FY2021/22 through revenue measures and expenditure web system.12 Furthermore, the spike in inflation due to moderation. Total revenue increased to 17.3 percent increased fuel and major food prices since March 2022 has of GDP in FY2021/22 from 15.7 percent in FY2020/21, partly contributed to higher VAT and excise duty collections. reflecting a reduction in tax expenditures through As a result, income tax, VAT and excise duty exceeded their harmonization of exemptions, improvements in tax targets in FY 2021/22 and previous year level (Figure 10). administration, and the pick-up in domestic demand. Strong revenue performance has continued in the first Despite rising fiscal pressures, low execution of both quarter of the current fiscal year. Total revenue and grants recurrent and development expenditures led to a fiscal reached 4.1 percent of GDP in Q1 2022/23, driven by deficit of 6.2 percent of GDP, below its target of 8.2 percent buoyancy in income tax and import duty (Table 1). of GDP and previous fiscal year level of 8.1 percent of GDP (Figure 9). However, recurrent expenditure in FY2021/22 On the expenditure side, the burden of fiscal increased relative to previous year due to rigid expenses consolidation has been shouldered by development (interest payments, wages and salaries) and management spending, following rigidity in some recurrent of emerging shocks during FY2021/22 including drought expenditures and introduction of fuel and fertilizer response and fuel subsidies. subsidies. Development expenditure declined to 4.2 percent of GDP in FY2021/22 lower than 4.9 percent of GDP A rebound in economic activities, the implementation of in 2020/21 and 6.7 percent of GDP on average in the five tax measures, and a spike in inflation during the second fiscal years before the pandemic. This is partly attributed to half of FY2021/22 have supported revenue collection. low execution of development expenditure. In contrast, the The economic recovery during 2021–2022 driven by non-discretionary nature of some of recurrent expenditures growth in employment, consumption, and investment (such as interest payments which account for more than reinvigorated Kenya’s tax base that had shrunk during the a quarter of recurrent expenditure), the introduction of pandemic. In addition, the government implemented tax subsidies, and spending on emergency drought support measures that have enhanced revenue collection. These program resulted in increased recurrent expenditure include (i) tax harmonization through reduction of tax (Table 1). Expenditure has remained unchanged in the first exemptions since January 2021, and (ii) enhanced tax quarter of FY2022/23, with recurrent expenditure higher compliance through voluntary tax disclosure program than the target and the outturn in the previous year. Figure 9: The government reduced its fiscal deficit Figure 10: Reduction in tax expenditure and improved tax compliance supported revenue performance 0 Income tax Value Added tax Excise duty Import duty (net) 16 -2 Percent of GDP 12 -4 Percent of GDP 8 -6 -6.2 -7.0 -7.3 -7.0 -8 4 -8.2 -10 0 2017/18 2018/19 2019/20 2020/21 2021/22* 2017/18 2018/19 2019/20 2020/21 2021/22* Source: The National Treasury Source: The National Treasury 12 KRA press release to explain VTDP, iWhistle, and M-service (https://www.kra.go.ke/news-center/press-release/1573-kra-records-excellent-perfomance,-exceeds-target-in-first- half-of-fy2021-22). 8 December 2022 | Edition No. 26 The State of Kenya’s Economy Spending related to COVID-19 has gradually declined, Figure 11: Prudent debt management has moderated the pace of debt accumulation but the government introduced subsidies in FY2021/22 External Domestic Total public debt (Gross) as the economy experienced a drought and rising food 80 67.7 67.3 and fuel prices. Spending on the health sector, which 59.6 63.0 56.5 had increased due to COVID-19 pandemic (1.0 percent of 60 50.0 54.5 GDP in FY2019/20 and 0.8 percent of GDP in FY2020/21), 44.1 Percent of GDP 42.8 37.6 declined to 0.6 percent of GDP in FY2021/22 following low 40 infections, with priority spending focused on vaccination programs. Meanwhile, the government introduced various 20 subsidies to minimize the impact of emerging shocks. The total cost of subsidies reached KSh 80.7 billion in FY2021/22 0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22* (equivalent to 0.6 percent of GDP). They include subsidizing pump prices, reduction in electricity tariff by 15 percent to Source: The National Treasury lower cost of power, granting waiver of import duty for level, pending bills reached KSh 153.0 billion (1.2 percent maize; subsidizing fertilizer to farmers; reduction of the of GDP) in FY2021/22. VAT rate on liquefied petroleum gas from 16 percent to 8 percent; and subsidizing maize flour. Energy, infrastructure, Fiscal consolidation and prudent debt management and ICT sector spending recorded the largest decline, by 1.1 have moderated the pace of public debt accumulation. percentage points from 3.0 percent of GDP in FY2021/22 After increasing by 3.5 percentage points on average every compared to 1.9 percent of GDP in FY2020/21. fiscal year since FY2012/13, public debt went up by only 0.4 percentage points to 67.3 percent of GDP in FY2021/22 The government started phasing out subsidies and (Figure 11). The rapid debt accumulation increased Kenya’s clearing accumulated pending bills during the first debt-related vulnerabilities, resulting in a rating of a high quarter of FY2022/23. The government completely risk of debt distress as assessed by the joint IMF/World Bank withdrew petrol price subsidies but retained subsidies Debt Sustainability Analysis13. The shares of domestic and on diesel and kerosene prices, as well as fertilizer. external sources in Kenya’s public debt remain roughly The total allocation for fertilizer subsidy is estimated equal. The government has implemented measures to at KSh 18.4 billion (0.1 percent of GDP) in FY2022/23. reduce debt servicing vulnerabilities and lower the cost Furthermore, settling pending bills would unlock cash of borrowing. For example, the uptake of domestic debt flow to government contractors and suppliers, reduce reflects borrowing more through treasury bonds with non-performing loans (Section 1.3), and stimulate the small and medium enterprises. Pending bills by the central longer term maturities (the ratio of treasury bonds to government rose to KSh 504.7 billion (4.0 percent of GDP) bills reached 83 percent in July 2022) and curtailing high- in FY2021/22 from KSh 359.5 billion (3.2 percent of GDP) cost commercial debt. The share of multilateral debt to in FY2020/21. During the first quarter for FY2022/23, the total external debt increased by 4.8 percentage points government prioritized settling existing pending bills to in FY2021/22 compared to FY2020/21, attributable to a unlock cash flow to businesses. Data show a decline in reduction in commercial debt (by 2.9 percentage points) pending bills to KSh 439.2 billion (3.1 percent of GDP) at and bilateral debt (1.9 percentage points). the end of September 2022. At the county government 13 IMF Country Report no.20/156. December 2022 | Edition No. 26 9 The State of Kenya’s Economy Table 1: Kenya- Summary of fiscal operations (percent of GDP) 2020/21 2021/22 2022/23 Q1 2021/22 Q1 2022/23 Actual Preliminary Estimate Preliminary Preliminary Total Revenue and Grants 16.0 17.5 17.8 4.1 4.1 Revenue 15.7 17.3 17.6 4.1 4.0 Tax revenue 12.6 13.9 14.4 3.3 3.1 Income tax 6.1 6.9 7.1 1.6 1.6 VAT 3.6 4.1 4.2 1.0 0.9 Import Duty 1.0 0.9 1.0 0.2 0.2 Excise Duty 1.9 2.0 2.1 0.5 0.4 Non-tax revenue 3.1 3.4 3.1 0.8 0.9 Grants 0.3 0.2 0.2 0.0 0.1 Expenditure and Net Lending 24.2 23.7 24.0 5.0 5.4 Recurrent Expenditure 15.8 16.7 16.2 3.6 4.1 Wages and salaries 4.3 4.1 3.8 1.0 0.9 Interest Payments 4.4 4.5 4.9 1.0 1.1 Domestic Interest 3.4 3.6 3.9 0.8 0.8 Foreign Interest 0.9 0.9 1.0 0.2 0.3 Pensions 1.0 1.0 1.1 0.2 0.2 Other 6.1 7.1 6.4 1.2 1.9 Development Expenditure 4.9 4.2 4.8 0.9 0.8 Transfer to Counties 3.5 2.8 2.9 0.5 0.5 Deficit including grants (cash basis) -8.2 -6.2 -6.2 -0.8 -1.2 Financing 8.4 5.9 6.1 0.9 0.9 Net domestic financing 5.5 4.7 4.2 -0.2 0.2 Net foreign financing 2.8 1.1 2.0 1.1 0.7 GDP (KSh billion) 11,370 12,752 14,002 Source: The National Treasury 2. Outlook and Risks 2.1. GDP growth is expected to remain above 26.5 percent (2019). Although the GDP growth projection pre-pandemic average in the medium term remains unchanged since the June 2022 Kenya Economic Kenya’s growth is projected above pre-pandemic Update, it reflects the surge in inflation since H2 2022, and average in the medium term. Kenya’s real GDP is projected government’s plan to reduce the cost of production and to grow by 5.2 percent on average in 2023–24, lower than food prices through fertilizer subsidy, as well as the effect the 7.5 percent rebound in 2021 from COVID-19 (Table of increase in minimum monthly wage by 12 percent (from 2), but a robust pace above the pre-pandemic average KSh 13,500 to KSh 15,120). of 4.8 percent and SSA’s average of 3.9 percent. Real per capita incomes are expected to grow, and the decline in Robust private investment will drive economic growth in poverty is expected to resume its pre-pandemic trend, the medium term amid sluggish growth in households’ reducing by just under a percentage point each year. The consumption. The ongoing favorable trends in the incidence of poverty, measured at the international $2.15/ underlying drivers of Kenya’s recent consumption growth day poverty line, is expected to fall from 26.7 percent in are expected to continue including the recovery in 2021 to 25.8 percent in 2022, below its pre-crisis level of employment, resilient diaspora remittances, and increase 10 December 2022 | Edition No. 26 The State of Kenya’s Economy in minimum monthly wage. However, consumption commodity prices favorable for Kenyan exports to boost growth is likely to be dampened in the near term due to Kenya’s growth in the medium term. However, the ongoing below average agricultural harvest, high inflation affecting shocks, including the long drought in arid and semi-arid real incomes, and tighter monetary policy. Our baseline areas, rising inflation, and tighter global financial conditions, forecasts continued strong growth in private investment in create challenges for Kenya to sustain its recovery. the context of improved investor confidence—following the just completed peaceful elections and smooth The ongoing drought and high inflation will continue to transition of power at both national and county levels— dampen Kenya’s growth in the near term. With Kenya’s and robust growth of credit to the private sector. agriculture being rain dependent, the effects of low agricultural performance predicated on depressed rainfall The planned fiscal consolidation will support are expected to spillover in early 2023, keep up food economic growth and reduce accumulation of debt. inflationary pressures and negatively affect households’ The government expects to reduce the fiscal deficit to food security.15 The government plans to address the 4.4 percent of GDP in FY2023/24, mainly through higher rising cost of food by subsidizing farm inputs, specifically revenue collection and moderation in spending. Measures fertilizer, therefore reducing the cost of production, and on the revenue side, including further reducing tax stimulating mass crop production. Moreover, the sustained expenditures, introducing a digital tax, and strengthening robust growth trajectory above Kenya’s potential growth tax administration to expand the tax base and improve will also increase demand induced inflationary pressures. compliance, are expected to raise domestic revenue to 18.0 percent of GDP in FY2023/24. Phasing out of subsidies, At the global level, tighter financial conditions have tight recurrent spending control, implementation of constrained Kenya’s access to finance, but improved public investment management (PIM) regulations and investors’ confidence is expected to support a recovery rationalization of the public investment portfolio will lower in foreign direct investment (FDI). Financial conditions expenditure to 22.8 percent by FY2023/24. Public debt is in emerging markets and developing economies are projected to decline to 64.5 percent of GDP in FY2023/24, expected to continue tightening, which could result in benefiting from economic growth, fiscal consolidation, low financial inflows, raise the cost of external borrowing, and reduced borrowing costs due to lower volumes of lead to decline in reserves and currency depreciation commercial borrowing in the financing mix. and further increase Kenya’s debt vulnerability. However, two factors are expected to mitigate this emerging The current account deficit is expected to narrow in the headwind. The peaceful general elections and transition medium term. Exports of goods and services are projected will continue to lift investors’ confidence and stimulate FDI to increase in the medium term supported by high prices while government’s commitment to use of concessional for Kenya’s commodity exports (coffee and horticulture), borrowing is expected to continue to provide access to growth recovery in Kenya’s trading partners in Africa (EAC finance without jeopardizing development needs and and COMESA), and low COVID-19 infections that will boost improve external debt sustainability. transport and tourism receipts. Our baseline forecasts robust growth in investment (leading to strong machinery The baseline assumes persistent low COVID-19 imports), however, with oil prices projected to decline—to infections and progress on vaccination to continue about US$85 a barrel in 2023 compared to an estimated supporting tourism growth. The proportion of adult US$98.2 a barrel in 2022 14 —imports are expected to population fully vaccinated increased to 35.7 percent moderate. As a result, the current account balance is in October 2022 compared to 31.8 percent in June 2022 projected to narrow to 5.3 percent of GDP in 2023–24. and 15.3 percent in December 2021. The containment of COVID-19 infections across different countries is expected Kenya’s growth prospects remain bright; however, to continue enhancing transport and tourism receipts. emerging shocks are challenging the broad-based Moreover, Kenya’s diaspora remittances will continue to rebound. The baseline assumes robust growth of credit supplement household consumption. to private sector, contained COVID-19 infections, and high 14 World Bank.2022. Macro poverty Outlook released in October. 15 Kenya Meteorological Department. 2022. Climate outlook for the October–December 2022 short rains season and review of the March-June-August Seasons, released August 31, 2022. December 2022 | Edition No. 26 11 The State of Kenya’s Economy The rise in credit to private sector will lift private for Kenya’s exports16. The resurgence in COVID-19 and investment in the context of modest public spending lockdowns could slow down the strong growth of transport on investment. The projected fiscal consolidation will and tourism sectors. continue to ease the pressure from domestic credit market and ensure sustainable lending to private sector in the On the domestic front, risks can emanate from fiscal medium term, while the planned prioritization of settling slippages. The projected medium term fiscal consolidation existing pending bills will unlock cash flow and expansion faces rising challenges and risks, including spending in activities by businesses. pressures to reduce the high cost of living as promised by the new government. Reintroduction of consumption 2.2. Downside risks continue to dominate subsidies such as fuel or maize prices subsidies could Lower than anticipated growth in Europe could result in increased government expenditure. Rising undercut ongoing recovery in exports and tourism, fiscal pressures could crowd out private sector lending, while prolonged war in Ukraine could increase Kenya’s deteriorate Kenya’s debt sustainability risks and shrink imports bill. Europe remains an important destination the needed fiscal space to carry out countercyclical fiscal for Kenya’s exports (in particular, horticulture products), policy should the need arise. Furthermore, tighter than source of diaspora remittance, and tourist arrivals. Lower anticipated monetary policy could choke the nascent than anticipated growth in Europe due to continued rebound in credit to private sector, reduce credit demand, supply shocks following the war in Ukraine, high energy and increase non-performing loans. cost, tighter monetary policies, would reduce demand Table 2: Medium-term outlook 2019 2020 2021 2022 e 2023 f 2024 f Real GDP growth, at constant market prices 5.2 -0.3 7.5 5.5 5.0 5.3 Private consumption 5.0 -2.5 6.2 5.4 5.0 5.2 Government consumption 5.6 3.0 5.7 6.6 5.3 5.2 Gross fixed capital investment 4.5 2.5 10.9 7.0 7.5 8.1 Exports (goods and services) -3.2 -8.8 12.9 6.2 7.4 7.8 Imports (goods and services) 1.8 -9.2 18.9 6.8 8.3 8.3 Real GDP growth, at constant factor prices 5.4 0.4 7.1 5.5 5.0 5.3 Agriculture 2.7 4.6 -0.2 -1.6 3.8 4.2 Industry 4.0 3.3 7.2 4.9 3.6 4.3 Services 6.7 -1.8 9.5 7.9 5.8 5.9 Inflation (consumer price index) 5.2 5.3 6.1 7.3 6.4 5.5 Current account balance (% of GDP) -5.2 -4.8 -5.5 -6.0 -5.5 -5.0 Net foreign direct investment inflows (% of GDP) 0.9 0.5 0.2 0.6 0.8 0.9 Fiscal balance (% of GDP)/1 -7.3 -7.0 -8.2 -6.2 -6.2 -4.4 Primary balance (% of GDP) -3.5 -3.4 -3.8 -1.6 -1.2 0.2 Debt (% of GDP) 59.6 63.0 67.7 67.3 67.3 64.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Notes: /1 = data reported in fiscal years 2019 = 2018/19; e = estimate, f = forecast. 16 Umutesi, A., & Gor, S. O. (2013). Price Elasticities of Kenya’s Exports. OIDA International Journal of Sustainable Development, 6(12), 87-104. 12 December 2022 | Edition No. 26 Special Focus SPECIAL FOCUS December 2022 | Edition No. 26 13 Special Focus 3. Policy options to support economic transformation and economic empowerment for inclusive growth Inclusive growth is key for shared prosperity. The Increasing agricultural productivity is key to the Government of Kenya has laid out an economic transformation agenda given the criticality of the sector transformation agenda focused on economic to the Kenyan economy in terms of employment and empowerment of the population at the bottom of the thus household incomes, contribution to GDP growth, pyramid. The agenda is premised on among others, the export revenues and linkages with other sectors. It is also need to address structural weaknesses and imbalances in one of the sectors that has leveraged digital technologies the real economy for a more inclusive growth. To drive the among the farming communities to improve productivity agenda, the government has identified five sectors as the and value chains. The digital economy therefore plays core pillars of the plan that are central to among others a key role in accelerating economic growth, and the reducing the cost of living, human capital development, COVID-19 pandemic brought to the fore the importance job creation, and inclusivity. These include agriculture; of accelerating developments in the digital sector. Not micro, small and medium enterprises (MSME); housing and everyone will be accommodated in the market economy. settlement; healthcare and the digital superhighway and As such, vulnerable households need to be protected and creative economy. with the protracted fiscal space, there’ll be need to balance between fiscal consolidation and social spending. A private sector-led growth framework is critical to sustainably increase living standards. This agenda is 3.1. Policies to transform the agriculture central to the World Bank’s twin goals of promoting shared sector in Kenya prosperity by improving the living standards of the bottom 3.1.1 Context and key challenges 40 percent of the population and ending extreme poverty. The agriculture sector is central to GDP growth, As discussed in part 1 of this report, economic growth in employment and poverty reduction, but productivity Kenya faces challenges from both global and domestic growth and value addition of the sector have been sources. The rising cost of living, climate change shocks, elusive. Yields for major crops in Kenya have stagnated and spending pressures to reduce the high cost of living (see table 3 below) well below peers - Rwanda, Ethiopia amid limited fiscal space are some of the immediate and Tanzania, driven by shortage of quality inputs, credit, challenges facing the government. extension services, and low investments in irrigation and rural roads. Less than 5 percent of Kenyan agriculture is In this special section, we propose policy options irrigated, and the sector has suffered from increasing that could be vital in contributing to the economic variability in rainfall. The average size of land holdings transformation agenda as well as support inclusive has been shrinking and small-scale production systems growth. While contribution from every sector will be key (between 0.2 and 3 ha) account for 78 percent of total in advancing the inclusive growth agenda, we focus on agricultural production and 70 percent of commercial policy priorities that are at the forefront of advancing the production17. Lending to the sector has on average stayed economic transformation agenda in agriculture, digital below 5 percent of banks’ total lending portfolio and lack economy and social protection. of predictable access to credit has hindered small scale Table 3: Yields for major crops in Kenya Productivity (Metric Tons/Hectare) 2106 2017 2018 2019 2020 Irish Potato 12.8 7.8 8.6 9.3 10.6 Green gram 0.5 0.5 0.6 0.6 0.7 Maize 1.4 1.7 2.0 1.8 1.7 Wheat 2.6 2.5 3.1 2.3 3.1 Beans 0.6 0.7 0.7 0.6 0.7 Coffee 0.4 0.3 0.4 0.4 0.3 Source : Economic Review of Agriculture , published in April 2021 by the Ministry of Agriculture 17 Kenya Agriculture Sector Growth and Transformation Strategy (ASGTS) (2009 – 2019). 14 December 2022 | Edition No. 26 Special Focus farmers from purchasing improved inputs. Distorted input and output markets and inefficient value chains hinder adoption of modern production technologies and post- harvest handling, while frequent climate-related shocks, pest infestations and diseases are exacerbated by declining soil health. Inefficient price discovery mechanisms lead to low farmgate prices and high food wastage. Climate change poses an additional challenge to the prospects of Kenya’s agriculture sector. Kenya’s climate has been changing over recent decades, increasing the likelihood and intensity of extreme weather events (such as drought and floods). Kenya’s mean surface temperature has risen by 1.00C since 1960s and is projected to continue rising by 1.70C by 2050s, putting agricultural production Pillar 1: Enhancing Productivity and food security at risk through its impacts on water Increase cereal crops productivity: Increasing productivity availability and seasonality, soil erosion, and changes in the of cereals and enabling them access to irrigation, better distribution, incidence and intensity of animal and plant quality inputs (seeds, fertilizers, and others) and improved pests and diseases. Considering the fact that 98 percent extension services is critical. Ensuring rapid scale up of the of agriculture is rainfed, rainfall related shocks expose “e-voucher” program as envisaged in the ASTGS as opposed small farmers to high vulnerability. The economic cost of to the manual distribution of only fertilizers through floods and droughts is estimated to create long-term fiscal government owned outlets will ensure better targeting, liabilities of 2 to 2.8 percent of GDP each year. Future climate greater accessibility for smallholders, a more balanced use change is expected to bear heavily on Kenya’s food and of fertilizers, link it to soil testing and use of other key inputs nutritional security with yield reductions of 40 - 45 percent like seeds and post-harvest equipment. expected for maize, rice, soyabean, coffee and tea by 2050, and increase in food prices by 75-90 percent by 2055. Increase livestock productivity: The livestock sub-sector Agricultural sector is also the largest source (59 percent) of accounts for 17 percent of agricultural GDP, and increased Greenhouse Gas (GHG) emissions in Kenya with livestock productivity could make important contributions to related emissions accounting for more than 96 percent. livelihoods and food security. Alleviating constraints in 3.1.2 Strategies and policies for transforming the livestock productivity will involve mechanisms to cope with agriculture sector drought, allied with improved access to basic infrastructure Kenya’s Agricultural Sector Transformation and Growth (water, markets, and animal health services), pasture, feed Strategy (ASTGS), 2019-29, provides a roadmap to and extension services. increase sector’s productivity. The strategy aims to: (i) raise small-scale farmer incomes through farmer-facing Specific focus on women and youth in agriculture: enterprises that provide inputs, equipment, processing, Identify constraints and involve women in the discussion and post-harvest aggregation; (ii) increase output and and development of solutions on rural women’s access to value-added through large private firms and large scale resources and incorporate their issues and concerns fully agro-processing hubs; and (iii) boost household food in agricultural programs and investments. To increase the resilience through community-driven interventions in productivity and attractiveness of agricultural employment pastoralism and fishing in arid and semi-arid lands. Drawing for young people, policies and programs must address at on ASTGS and recent analytical work, the agriculture least four constraints: poor access to credit and financial sector’s transformation agenda is founded on three pillars; services, a lack of infrastructure, and a lack of skills. enhancing productivity, commercialization, and mitigation of, and adaptation to, climate change. December 2022 | Edition No. 26 15 Special Focus demonstrating the potential of the private sector to drive development in the sector more widely. Despite this success, Kenyan farmers still face major challenges in marketing their produce, and the potential for adding value to products such as tea, coffee, pyrethrum, milk, beef, fruits, and vegetables remains largely untapped. The government should facilitate private sector involvement in developing marketing infrastructure and regional and international quality and safety standards; empower farmer organizations to play their role in providing market support services; and invest in value-adding technologies through public-private partnerships. Focus on value addition: In 2017, over 1.9 million tons of food was wasted to post-harvest losses while Kenya Pillar 2: Growth and commercialization was facing a severe drought. Small farms continue to Expand small-scale irrigation: The government could produce 73 percent of total marketed production, most support a number of interventions in small-scale irrigation. of which goes to the market in basic form without any The priority should be to rehabilitate viable and sustainable value addition. Only 16 percent of Kenya’s agricultural irrigation schemes, focusing on small to medium-scale exports are processed, compared with 57 percent for schemes with the best prospects for success, regardless of imports. However, there is potential to significantly ramp whether they are located in the arid and semi-arid lands up value addition across several agriculture and livestock (ASALs) or in areas with greater agricultural potential. value chains to boost producer incomes while generating The key to faster improvements could be in supporting new jobs. Value addition is also a crucial pathway for Farmer Led Irrigation Development (FLID) where public climate change adaptation, bringing down producer level sector plays a facilitative role – coordinating private sector wastage and risk and enhancing overall value. Significant irrigation suppliers and financial institutions to provide employment can also be created in the off-farm service credit to farmers – rather than an implementing role. sector if the focus on agribusiness and value addition is It is also critical to ensure that such a system of scaling successful, and through improving and expanding livestock up irrigation is completely farmer led. Recent estimates activities (especially dairying). Key actions to enhance agro- suggest18 that small-holder farmers on around 240,000 processing level include ensuring early-stage funding to hectares could see net profit gains of up to US$570 per complete international standard feasibility studies; better hectare from individual investments in irrigation. inter-ministerial and county level coordination; enhancing critical infrastructure like roads, power and water at Operationalization of Warehouse Receipt System potential sites; and incentives, e.g., transport and tax breaks (WRS) & the National Commodity Exchange (COMEX): to commercialize new facilities. a) Increase flexibility to farmers of when they choose to sell their produce; b) Increase lending to the agricultural Tackle land constraints: Government should consider sector by providing alternative security; c) Allow millers divestiture or subdivision of large farms on which much and processors to procure grain directly from farmers thus land is unused or under-used. Policies and laws should reducing transaction cost; d) Improve quality and grading also be developed to improve tenure security, land use in the entire value chain; e) Reduce post-harvest losses and development, and sustainable conservation of the through professional storage. environment. Creating a consolidated, geo-referenced land registry, developing and implementing a land- Enabling greater private sector involvement: Private use master plan (both national and county levels), and investments have successfully expanded growth in key investing in institutions is also critical. An immediate step agricultural sub-sectors such as cut flowers, horticulture, could be to competitively procure up to 50 new large-scale dairy, tea, and agricultural input markets, amply farm concessions (of 2,500 acres or more) to unlock up to 18 Smart Water for Agriculture (2019). 16 December 2022 | Edition No. 26 Special Focus 500,000 acres of new farm production as mentioned in In terms of the timing of the roll out of the above the ASTGS. While much of the land will be state-owned, suggestion recommendations, given the current food the new farm enterprises will need to be predominantly security situation, the interventions under Pillar 1 funded and owned by the private sector. (enhancing productivity) need to be prioritized in the short term. While the recommendations under pillar 2 and pillar Strengthening urban food systems and food safety: By 3 are equally critical, these could be focused upon in the 2050, Kenya’s urban population will likely triple, increasing medium to long term. demand for high-value perishables such as poultry, dairy, livestock, and horticultural products, but also escalating 3.1.3 The “How” of the strategy food prices and requiring investments in food safety and Strengthen coordination with the counties and build food security. Strengthening value chains and reforming capacity of county agriculture teams: Given that disjointed food systems can achieve the triple win on agriculture is a devolved sector, there is a need to further nutrition, value chains and resilience. Strengthening strengthen the coordination mechanisms between the the appropriate institutional and policy framework that national ministry and the county teams for both extension ensures coordination across multiple sectors and ministries and better delivery of agriculture inputs. The county like Agriculture, Health, Urban Development and Trade to extension teams need to be strengthened with additional promote safer urban food systems is critical. recruitment, and significant investment in building their capacity is important. Wherever applicable, enabling the entry of private extension service providers and scaling up the use of the skilled farmer-based extension services that can also provide self-employment/business enterprise opportunities for educated youth at the county level would be essential. Strengthen the monitoring & evaluation systems both at the national & county level within the ministry of agriculture and institutionalizing performance- based tracking and ranking: There is an urgent need to strengthen the monitoring systems within the Ministry of Agriculture and enable “real time” tracking of certain key performance indicators. Furthermore, verticals within the ministry and the counties need to be ranked on a periodic basis using specific performance indicators to ensure Pillar 3: Building climate resilience that performance is rewarded/recognized, and non- Building climate resilience and adopting climate smart performance is identified and tackled. agriculture is extremely critical and will involve key interventions including: a) Significantly improving water/ Reinvigorate the agriculture research – extension soil management; b) Promoting sustainable, community‐ linkages by strengthening the Kenya Agriculture driven rangeland management and improved access and Livestock Research Organization (KALRO) and to quality livestock services in ASALs— specifically, in facilitating partnerships with the strong network of pastoral/extensive livestock production systems and c) CGAIR institutions: KALRO needs to be strengthened so Support the generation and dissemination of improved that there is greater emphasis on “transferring” the existing/ agricultural technologies, innovations and management available technologies, especially, the use of high yielding practices (TIMPs), building sustainable seed systems and climate smart seed varieties, to the farmers by having and enhancing access to quality agro-weather, climate, strong linkages with the extension systems at the county advisory, and market information services among farmers/ level. Kenya has the unique advantage of hosting several herders for improved decision making. CGIAR institutions that are investing huge resources to December 2022 | Edition No. 26 17 Special Focus develop modern agriculture technologies. KALRO needs has one of the highest mobile money penetration rates in to further strengthen its linkages with CGIAR institutions the world (with transactions equivalent to 57 percent of to ensure that they are fully leveraging the technologies national GDP in 2021). already developed by these institutions for the benefit of farmers in Kenya. The Government of Kenya is eager to position the country as a hub for information and communication, Leverage digital technologies to enable enhanced and digital services. The new government manifesto has access to services for smallholders: Kenya is leading identified the Digital Superhighway and Creative Economy the agricultural technology space, with 30% of DATs as one of its five key pillars to accelerate economic (Disruptive Agricultural Technologies) that exist in Africa development in the country. The COVID-19 pandemic located in Kenya. The ASTGS also has a strong emphasis on demonstrated the importance of digital technologies for leveraging digital technologies. Through the support from business continuity and enabling essential services to World Bank, KALRO has developed a Big Data Platform continue operations with minimum interruption during the with a database of 2.35 million farmers in Kenya with lockdown. Over the last two decades, Kenya has invested in spatial data and farmer details being utilized to provide digital infrastructure and services including six submarine integrated agro weather and market information to fiber-optic cables offering broadband connectivity, some farmers and agricultural institutions. In addition, the One 9,000km of national fiber backbone connectivity reaching Million Farmer Platform launched jointly by the World Bank all counties, digitized public services and supported its first and the Ministry of Agriculture in Kenya has seen 27 high technology/innovation hubs. The government has also potential Ag-tech start-ups signing formal agreements made progress on key policies and enabling environment with 26 counties to support provision of digital solutions reforms, including enactment of a new Data Protection in the areas of extension, credit, agro-advisory and market Act and establishment of an Office of the Data Protection linkage. Thus, clearly technologies such as mobile apps, data Commissioner (OPDC). A new Digital Economy Strategy analytics and digital extension can be used to dramatically and a new Spectrum Policy are in the final stages of public improve farmers’ yields if deployed and scaled effectively. consultations. The government manifesto promises Technology can also enable suppliers to aggregate farmers’ universal broadband within 5 years through extension of demand for inputs like seeds and services like tractors, the digital superhighway to 100,000 km of fiber networks which can then cost-effectively be delivered to farmers across the country. It also promises a reduction in the at the farmgate. Other promising approaches include costs of calls and data to allow entrepreneurs and youth financial services, enterprise development, market access, to use online platforms for entertainment, information and data analytics. and business; improvement of learning outcomes through connecting all schools to the internet. The manifesto 3.2. Policies to accelerate Kenya’s digital commits the government to digitize 80 percent of economy 3.2.1 Digital transformation as a driver of Kenya’s inclusive growth agenda On many counts, Kenya is emerging as a digital economy leader on the African continent that is realizing the potential of the digital economy to accelerate and “future- proof” economic growth, as well as expand opportunities and access to new jobs and services for all Kenyans. Kenya has the most advanced digital infrastructure networks (public and private) in the East Africa region and, through its direct access to international connectivity, it serves as a key transit hub for international bandwidth for its landlocked neighbors. With more than 95 percent of its population covered with 3G or higher signal, mobile internet uptake has reached 56.5 percent and the country 18 December 2022 | Edition No. 26 Special Focus government services and promote Kenya as a regional hub for promotion of software exports. It will also focus on further development of the creative economy combined with digital initiatives to connect youths to new types of job opportunities. This will require equipping youth with the right affordable tools and skills and enhance their abilities to compete for job opportunities, enabling greater participation in the digital economy and creative industries. While the country has made impressive gains, there remains a lingering digital divide in access to broadband services, digital public services and the capabilities needed for individuals and businesses to thrive in an increasingly digitized economy and society. A World Bank digital economy diagnostic study, conducted in competition and efforts to improve digital literacy for the 201919, revealed gaps in digital infrastructure and access general population as well as accessibility, uptake, and to broadband, especially in rural areas; gaps and a lack of user experience for e-government services. Likewise, the integration in government infrastructure for digital service growing privacy and security risks of the digital era will delivery, and in its platforms and practices. While there are need to be mitigated to boost trust and uptake of digital pockets of excellence, nevertheless the study also found transactions and services. wide disparities in digital skills and barriers to scaling-up digitally enabled firms and employment opportunities. 3.2.2.1 Key challenges Sustaining Kenya’s digital leadership will require significant Need to expand access to broadband to increase digital private and public investments and forward-looking inclusion to ensure that all Kenyans benefit from the policies to close the broadband connectivity divide. It will digital economy. Broadband access rates are increasing also require focused efforts to improve accessibility, uptake but network coverage remains insufficient particularly in and user experience for e-government services. Likewise, rural and underserved areas where over 70 percent of the the growing privacy and security risks of the digital era will population resides. Last mile connectivity remains low, need to be mitigated to boost trust and uptake of digital hindering delivery of key public services such as education, transactions and services. There is scope for additional health and judicial services. The government owned policy and regulatory reform that will help to attract National Optic Fiber Backbone Infrastructure (NOFBI) is additional private sector investment. an aging and under-maintained network, which is not 3.2.2 Securing Kenya’s digital future: critical reforms keeping up with the country’s investment needs. In 2021, and investments management of NOFBI reverted from Telkom Kenya to the Kenya’s digital transformation has been remarkable, ICT Authority (ICTA). The government, in conjunction with yet much more remains to be done to build a digital other players, is seeking fresh investment, with a goal to economy that is dynamic, inclusive and safe and expand to 100,000 km of fiber. To ensure improved quality embraces opportunities arising from larger regional and sustainability, NOFBI needs a new commercial business markets. Several binding constraints will need to be model. Policy actions such as reduction of spectrum fees addressed in the short term alongside forward-looking for mobile towers in underserved areas and removal of VAT investments and reforms to build the foundations needed on broadband services would also serve to increase last for every Kenyan to thrive in the economy and society of mile connectivity and broadband adoption. the future. Sustaining Kenya’s digital leadership will require significant private and public investments and forward- Need to strengthen competition in the telecoms sector looking policies to close the broadband connectivity to improve access and affordability of telecom services. divide. It will also require focused reforms to improve Market dominance in telecoms and mobile money markets 19 Key findings are featured in the 20th edition of the Kenya Economic Update. See: http://documents.worldbank.org/curated/en/968481572468094731/pdf/Kenya-Economic- Update-Securing-Future-Growth-Policies-to-Support-Kenya-s-Digital-Transformation.pdf. December 2022 | Edition No. 26 19 Special Focus should be addressed to ensure adequate competition Need to boost digital skills and platforms. Kenya has and to maintain the pace of investment, innovation and made concerted efforts to embed digital skills in its national reduction in prices for consumers that have driven Kenya’s education system. However, more can be done to improve digital economy growth. Due to network effects, market the effectiveness of these efforts and to ensure universal dominance in one segment reinforces a firms position coverage. For instance, while the Digital Literacy Project20 in other sectors as it is difficult for users to operate and (DLP) distributed some 1.2 million devices covering 91 exchange between different platforms, for instance percent of primary schools, only a third of schools are still between voice, data and mobile money services. using the equipment as intended, due to a lack of internet connectivity, reliable power supply, continuous teacher Need to enhance government institutions and training21 and available content to support digital delivery infrastructure for improved service delivery. Lack of of the new competency-based curriculum. Approximately secure and seamless connectivity within the government half of Kenya's population is younger than 18, and 9 million network is impacting efficient digitization of government individuals are expected to enter the labor force between operations. These constraints have led many central and 2015 and 2025. To absorb this "youth bulge", Kenya needs county level government institutions to adopt their own to create an average of 900,000 jobs every year, and these individual connectivity and data hosting solutions at much can be facilitated through strengthening both digital talent higher aggregate cost. This results in reduced security and digital jobs portals. and limits opportunities for data exchange, integration of systems and adoption of cloud-based solutions across Kenya needs the economies of scale and network effects governments. While significant progress has been made of a larger and more competitive regional market for in offering e-government services – the eCitizen web/ its tech startups and IT firms to grow and to achieve its mobile portal provides access to over 86 services - these vision to be one of the premier digital investment and digitization efforts have increased the need for better innovation hubs on the continent. Likewise, the lagging data protection and cybersecurity. While regulatory and countries in the region would benefit from greater access institutional mechanisms such as the Data Protection Act, to Kenyan innovations and services and lower costs of and the Office of the Data Protection Commissioner have connectivity. The heads of state of Kenya, Rwanda, Uganda been put in place, these are yet to be fully operationalized. and South Sudan committed to forming a single digital The primary challenge that remains to be tackled is creating market at the Northern Corridor Summit in June 2018. an online trust environment and using data to improve The agenda is being supported through the Eastern uptake, accessibility and user experience of public services. Africa Regional Digital Integration Project (P176181) which proposes a regional International Development Association (IDA) grant to the EAC secretariat and regional institutions to facilitate development of harmonized legislation, regulation, policy, and standards that can be adopted across the region to create a unified market. 3.2.2.2 Priority actions and recommendations i. Review level of VAT on broadband services to boost broadband adoption, a fundamental enabler of digital economy growth. ii. Reduction of spectrum fee (or elimination of fees in rural areas) to encourage expansion of connectivity. iii. Extend reach of broadband networks and last mile connectivity for public service delivery to increase access to high-speed internet for individuals, industry, and government. 20 The DLP seeks to equip schools with digital devices, content and teacher training to expose students to technology at an early age. 21 Despite conducting teacher training sessions under DLP, the Teacher Service Commission (TSC) reports that some 80 percent of primary school teachers felt they still lacked the ICT knowledge to translate training into practice. 20 December 2022 | Edition No. 26 Special Focus iv. Leverage public infrastructure investments to connect critical public institutions and service locations such as healthcare facilities, courts and schools while simultaneously helping unlock private infrastructure investments in the last mile to better serve rural areas and rollout next generation connectivity services and technologies. v. Strengthen competition in the telecoms sector to improve access and affordability of telecom services. vi. Increase the efficiency of government service delivery through digitization to enable government to better utilize digital technologies and enhanced connectivity to improve public service delivery and support public sector modernization, innovation, and resilience. Safety Nets Program (HSNP) which has become a global vii. Increasing and improving access to digital skills and best practice with its ability to respond rapidly to climate jobs, as well as more affordable devices, to equip shocks such as droughts based on remotely sensed satellite young Kenyans with digital skills and provide access data, providing income support to vulnerable families; (ii) to job opportunities enabling greater participation in the Nutrition Improvements through Cash and Health the digital economy. Education (NICHE) being tested in selected counties24 viii. Advance legislation, regulation, policy, and standards that provides incentives for poor households to improve in line with regional instruments to enhance regional the nutritional status and cognitive development of their digital market integration. An integrated digital children; (iii) the Haba Haba and Mbao pension plans, which market would allow Kenyan tech startups and IT enable informal sector workers to save for retirement; (iv) firms to benefit from economies of scale and network the Kenya Youth Employment and Opportunities Program effects on a regional level. (KYEOP) that addresses both demand- and supply-side labor market constraints for vulnerable youth as well as 3.3. Policies to strengthen social protection to improve living standards and support the supporting labor market intermediation; and (v) steadily most vulnerable segments of the society modernizing delivery systems that leverage the financial 3.3.1 Context and key challenges sector and digital infrastructure to provide electronic payments to beneficiaries. Kenya’s social protection system has developed significantly, contributing to poverty reduction. The past Despite these innovations and good progress, significant decade has seen significant enhancements in Kenya`s challenges continue to undermine the effectiveness of social protection (SP) system with a gradual increase in the the SP system. Sizeable gaps in coverage and adequacy of coverage of safety net and youth employment programs to social safety nets remain, particularly among the poorest support the poor and vulnerable. As of 2020, the flagship and those working in the informal sector. Expenditure Inua Jamii program22 has been supporting 1.19 million on non-contributory, government financed social safety direct beneficiaries with cash transfers (roughly 4.6 million net amounts to roughly 0.3 percent of GDP (2020-21), far indirect beneficiaries23), fully financed by the national below the average of 2 percent in upper-middle-income government’s budget with support from its development countries, which Kenya aspires to become25. Thus, despite partners. In recent years, a number of innovations have the growth of the Inua Jamii program, social assistance been introduced to the SP system, including: (i) the Hunger coverage and adequacy remains very low reaching only 22 The Inua Jamii program is an umbrella term for four social assistance cash transfer programs: the Cash Transfer for Orphans and Vulnerable Children (CT-OVC); the Senior Citizens’ Program; the Persons with Severe Disability Cash Transfer (PwSD-CT); and the Hunger Safety Net Program (HSNP). 23 Indirect beneficiaries include both the recipients of the transfer and the members of their households that also stand to benefit from that transfer. 24 NICHE counties include Kilifi, Kitui, Marsabit, Turkana, and West Pokot. 25 0.3 percent of GDP is the amount spent on the Inua Jamii program’s cash transfers. Expenditure (and coverage) data for non-Inua Jamii social assistance programs was not available but is assumed to be relatively low. The UMIC average is derived from the latest data available in ASPIRE. December 2022 | Edition No. 26 21 Special Focus around 12.5 percent of the bottom quintile26 and Inua release of national budget allocations to the Inua Jamii Jamii transfers accounting to less than one-eighth of the programs, compromising their development objective and consumption needs of households in the poorest quintile, likely eroding the hard-won gains made through multiple with the nominal transfer value remaining unchanged years of investments. The ad-hoc indexation of current since 2012 and the real value having declined by 32 percent civil service pensions also contributes to unpredictability since that time27. Further, as of 2019, only 20 percent of in old-age income. Furthermore, stronger coordination the labor force was covered by some type of retirement and partnership arrangements between the national and scheme, leaving the majority—a mixture of informal sector the sub-national governments is crucial to fully unlock workers and adults outside the labor force – unprotected the technical, financing, and implementation capacity of in old-age. Together, this means that only a small share of county governments to maximize the outcomes of social Kenyans has access to any form of social protection across protection in Kenya. their lifecycle. Relatedly, the mandated contribution rate to the National Social Security Fund (NSSF) is extremely 3.3.2 Priority policy and institutional recommendations low, with the average contribution amounting to less Increase expenditure on social assistance. To move than 1 percent of the average private sector wage.28 Low closer to international comparators, Kenya should increase contribution rates during working life and high operating spending on social assistance as a basis for increasing costs of the NSSF mean that retirees typically receive low coverage and improving the adequacy of benefit transfer lump sums (on average Ksh 58,368 as at 2019).29  values, which are critical to enhancing the poverty alleviation outcomes. Given the low coverage among Timely cash transfer payments and stronger the poor, expansion in social assistance programs should coordination with county governments would increase prioritize scarce resources toward the poorest first30 as part the impact of Kenya’s social assistance programs. In recent years, cash transfer payments have continued to suffer from of a progressive realization of universal social protection delays. Resulting unpredictable payment schedules pose over the longer term enabled by enhanced fiscal space adverse effects on beneficiary households who are unable and stronger implementation capacity. to rely on them when they need them most. An ongoing challenge to timely payments has been the delayed A sustainable financing model. Relatedly, while increasing government expenditures on social assistance coverage, private sources of financing such as disaster risk insurance and others should be integrated into the social protection financing model. This could be done by creating a more enabling environment for individual pension savings to better address the contingent liabilities associated with pensions as well as an insurance-based risk transfer mechanism to help finance timely HSNP expansion in response to large shocks such as recurrent droughts. Social insurance reform. To create a more enabling environment for retirement savings, the government should amend the NSSF 2013 Act to allow higher contributions while enforcing stricter regulation of administrative costs incurred by the NSSF to facilitate better returns on pension 26 The estimates are based on latest household survey data of 2015/16. 27 This is true of each of the Inua Jamii programs with the exception of the HSNP which saw a one-time increase from 2000KsH to 2700KSH, however the value of which has also eroded to a similar degree. 28 The public expenditure review only focuses on out-of-school programs and so excludes technical and vocational education and training (TVET), which come under education. It also only includes national government programs, not county programs. Finally, as it is not a strict employment program, the National Youth Service has not been included in this public expenditure review. 29 This is true of each of the Inua Jamii programs with the exception of the HSNP which saw a one-time increase from 2000KsH to 2700KSH, however the value of which has also eroded to a similar degree. 30 For example, World Bank analysis suggests expanding cash transfers to children within the six poorest counties of Kenya would help to reduce the poverty rate in those counties by 13 percentage points, on average at just 0.2 percent of GDP. 22 December 2022 | Edition No. 26 Special Focus savings. More robust voluntary savings for workers in both Taking these innovations to a national scale will help to formal and informal sectors would promote inclusion and address Kenya’s longstanding human capital development help in reducing inequality, poverty and vulnerability, and inclusive growth challenges. particularly among the elderly and working Kenyans. For social insurance: 3.3.3 Priority development investments Improved NSSF business processes. Investments in For social assistance: delivery systems should aim at reducing fragmentation Recertifying existing beneficiaries. Strengthening the and administrative inefficiencies in social insurance ability to accurately target the poor and vulnerable with schemes. The Retirement Benefits Authority (RBA) should social assistance programs like the Inua Jamii is critical to enforce stricter regulation of administrative costs incurred sustainably improve their impact on poverty and inequality. by NSSF, while NSSF works to address operational The recertification of existing Inua Jamii beneficiaries shortcomings by investing in improved business followed by the periodic update of beneficiary data is an processes. This would make NSSF an important player in important step and will create space for new and deserving providing robust voluntary savings options for workers families to access social assistance. While the process was in the informal sector, supporting the goals of both initiated in 2019, it has yet to be completed and should short-term savings to facilitate consumption smoothing, be prioritized to improve the efficiency of cash transfer unemployment insurance, as well as long term savings for expenditures. retirement. Rolling out the Enhanced Single Registry (ESR). Kenya is A platform for informal sector pensions and other digital developing an ESR that will expand the existing beneficiary financial services. Pension plans targeted toward informal registry of the Inua Jamii cash transfer program by sector workers struggle with low take-up and high rates of collecting socioeconomic information on 50 percent of all withdrawal. New services and products—such as bundled Kenyan households by June 2023. The ESR is well placed insurance and flexibility in design—could be included to to serve as a national asset for the government, including motivate informal sector workers to also save for the long county administrations, and non-government programs term. Plans such as Haba Haba by NSSF could become more to objectively target vulnerable and poor Kenyans more cost effective if integrated with a centralized administrative efficiently and effectively both in normal times and in platform. By offering sophisticated, technology-oriented response to shocks and crises. A rapid roll-out of the ESR services, such a platform would reduce bottlenecks to can help to complete the Inua Jamii recertification process registration and establish a digital infrastructure on which as well as effective implementation of fiscal consolidation the additional products and services can be built. measures by protecting the poor and vulnerable. For youth employment: Investing in human capital, labor market programs Increased employment and earning opportunities for and livelihoods. Recent innovations such as NICHE youth, women, and underserved areas. Most employment introduced to complement cash transfers are an important interventions are concentrated in urban areas, with low step towards improved outcomes in the early years coverage in rural, poorer areas, coupled with generally of life, supporting the health, nutrition and cognitive limited access to those programs for youth and women. development of children for better learning and earning The KYEOP provides an innovative and proven platform capabilities in the future. The ongoing economic inclusion that could be scaled up to address the constraints facing program, which is currently being tested in five counties, is vulnerable youth and women, helping to better integrate also well placed to provide pathways to strengthening the them into the labor force and increase their productivity in livelihoods of the poor to self-sustain themselves over the wage and self-employment. longer run and contribute to economic growth of Kenya. December 2022 | Edition No. 26 23 REFERENCES Baffes, J. and Koh, W.C. 2022. Fertilizer prices expected to remain higher for longer: https://blogs.worldbank. org/opendata/fertilizer-prices-expected-remain-higher-longer Fews Net. 2022. Kenya Food Security Alert, May 9, 2022: As an already historic four-season drought drives widespread need, a fifth poor season is now forecast, May 2022. (https://fews.net/sites/default/files/ documents/reports/Kenya_Alert_05102022-final.pdf ) Government of Kenya. 2022. National Drought Early Warning Bulletin, September 2022: https://reliefweb.int/ report/kenya/national-drought-early-warning-bulletin-september-2022 Government of Kenya. 2022. The 2022 Long Rains Season Assessment Report, July 2022. International Monetary Fund (IMF). 2020. Kenya Country Report No. 20/15 Kenya Agriculture Sector Growth and Transformation Strategy (ASGTS): Towards sustainable agricultural transformation and food security in Kenya, 2009 – 2019. Kenya Meteorological Department. 2022. Climate outlook for the October–December 2022 short rains season and review of the March-June-August Seasons, released August 31, 2022. Kenya Revenue Authority. 2022. Press release: KRA records excellent performance, exceeds target in first half of FY2021/22: https://www.kra.go.ke/news-center/press-release/1573-kra-records-excellent-perfomance,- exceeds-target-in-first-half-of-fy2021-22 Smart Water for Agriculture (2019) The Central Bank of Kenya, FSD Kenya, and the Kenya National Bureau of Statistics. 2022. FinAccess Household Survey, County perspective. November 2022 The Central Bank of Kenya. 2022. Monetary Policy Committee Hotels Survey, May 2022. The National Treasury and Planning. 2022. “Draft 2022 Budget Review and Outlook Paper”. September 2022. Nairobi. The National Treasury. 2022. Quarterly Economic and Budgetary Review. First Quarter, Financial Year 2022/2023. Umutesi, A., & Gor, S. O. (2013). Price Elasticities of Kenya’s Exports. OIDA International Journal of Sustainable Development, 6(12), 87-104 WFP and FAO. 2022. Hunger Hotspots. FAO WFP early warnings on acute food insecurity: October 2022 to January 2023 Outlook. Rome. World Bank. (2019). Kenya Economic Update Edition 20: Securing Future Growth, Policies to Support Kenya’s Digital Transformation. Washington, D.C. : World Bank Group World Bank. (2022) Africa's Pulse, No. 26, October 2022: Food System Opportunities in a Turbulent Time Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/37281 World Bank. 2022. COVID-19 Rapid Response Phone Survey with Households 2020-2022, Panel Waves 1-8 accessible on https://doi.org/10.48529/tch6-jx12 World Bank. 2022. Global Economic Prospects, June 2022. Washington, DC: World Bank. © World Bank. https:// openknowledge.worldbank.org/handle/10986/37224 World Bank. 2022. Monitoring COVID-19 Impact on Households in Kenya accessible on https://www. worldbank.org/en/country/kenya/brief/monitoring-covid-19-impact-on-households-and-firms-in-kenya World Bank.2022. Macro poverty Outlook, October 2022: http://macropovertyoutlook.worldbank.org/ 24 December 2022 | Edition No. 26 ANNEX TABLES Table A1: Selected economic indicators, 2018-2024 2018 2019 2020 2021 2022 2023 2024 Act. Act. Est. Proj. Proj. Proj. Proj. Output and prices (Annual percentage change, unless otherwise indicated) Real GDP 5.6 5.2 -0.3 7.5 5.5 5.0 5.3 Agriculture 5.7 2.7 4.6 -0.2 -1.6 3.8 4.2 Industry 3.8 4.0 3.3 7.2 4.9 3.6 4.3 Services 6.0 6.7 -1.8 9.5 7.9 5.8 5.9 Private consumption 4.7 5.0 -2.5 6.2 5.2 5.0 5.1 Government consumption 7.0 5.6 3.0 5.7 6.6 5.2 5.0 Gross fixed capital investment -0.4 4.5 2.5 10.9 7.0 7.5 8.1 Exports, goods and services 6.8 -3.2 -8.8 12.9 6.2 7.4 7.8 Imports, good and services 1.4 1.8 -9.2 18.9 6.8 8.3 8.3 GDP deflator 4.2 4.2 4.9 5.0 6.6 5.9 5.5 CPI (period average) 4.7 5.2 5.3 6.1 7.3 6.4 5.5 Money and credit (Annual percentage change, unless otherwise indicated) Broad money (M3) 10.1 6.0 13.3 6.2 .. .. Credit to non-government sector 2.4 7.1 8.5 8.5 .. .. Policy rate (CBR) 9.0 8.9 7.2 7.0 .. .. NPLs (percent of total loans) 10.0 10.0 12.2 11.1 .. .. Central government (fiscal year i.e 2019 = 2019/20) (Percent of GDP, unless otherwise indicated) Total revenue & grants 17.7 16.5 16.0 17.5 17.7 18.3 18.3 Tax revenues 14.4 13.0 12.6 13.9 14.4 15.2 15.2 Non-tax revenues 3.1 3.3 3.1 3.4 3.1 2.8 2.9 Grants 0.2 0.2 0.3 0.2 0.2 0.3 0.3 Expenditure 25.0 24.2 24.2 23.7 24.0 22.8 22.2 Current 15.7 15.5 15.8 16.7 16.2 15.1 14.7 Capital 5.6 5.6 4.9 4.2 4.8 5.1 5.1 Primary balance -3.5 -3.4 -3.8 -1.6 -1.2 0.2 0.6 Overall balance including grants -7.3 -7.0 -8.2 -6.2 -6.2 -4.4 -3.8 Financing 7.4 7.4 8.4 5.9 6.1 4.4 3.8 Net domestic borrowing 3.1 4.2 5.5 4.7 4.1 3.1 3.2 Foreign financing 4.3 3.2 2.8 1.1 2.0 1.3 0.6 Public debt stock (fiscal year i.e 2019 = 2019/20) (Percent of GDP, unless otherwise indicated) Public gross nominal debt 59.6 63.0 67.7 67.3 67.3 64.5 61.6 External debt 31.0 33.1 35.2 33.6 32.6 30.4 27.7 Domestic debt 28.6 29.9 32.5 33.6 34.7 34.2 33.8 Memo: GDP at current market prices (KES billion) 9,746 10,238 10,716 12,098 13,760 15,373 15,374 Source: World Bank, National Treasury, Central Bank of Kenya, Kenya National Bureau of Statistics 26 December 2022 | Edition No. 26 Table A2: GDP growth rates for Kenya and EAC (2018-2022) 2018 2019 2020 2021 2022e Kenya 5.6 5.2 -0.3 7.5 5.5 Uganda 6.3 6.4 3.0 3.4 3.7 Tanzania 5.4 5.8 2.0 4.3 5.3 Rwanda 8.6 9.5 -3.4 10.9 6.8 Burundi 1.6 1.8 0.3 1.8 2.5 Congo (DR) 5.8 4.4 1.7 5.7 6.0 South Sudan -3.5 3.2 9.5 -5.1 -0.8 Source: World Bank Note: “e” denotes an estimate Table A3: Kenya annual GDP (2010-2021) GDP, GDP, 2016 GDP/capita, GDP Years current prices constant prices current prices growth KSh Millions KSh Millions US$ Percent 2010 3,598,000 5,794,000 1,080 8.1 2011 4,163,000 6,090,000 1,085 5.1 2012 4,767,000 6,368,000 1,272 4.6 2013 5,311,000 6,610,000 1,355 3.8 2014 6,004,000 6,942,000 1,462 5.0 2015 6,884,318 7,287,024 1,465 5.0 2016 7,594,064 7,594,064 1,525 4.2 2017 8,483,396 7,883,816 1,633 3.8 2018 9,340,307 8,327,604 1,794 5.6 2019 10,255,654 8,756,946 1,909 5.2 2020 10,752,992 8,735,040 1,872 (0.3) 2021 12,062,619 9,391,684 2,007 7.5 Source: Kenya National Bureau of Statistics and World Development Indicators December 2022 | Edition No. 26 27 28 Table A4: Contribution by sub-sectors (percentage points) Industry by sub sector contribution Services by subsector contribution December 2022 | Edition No. 26 Year Quarterly Agriculture Industries Accommo- Information Services Mining and Electricity and Transport and Financial and Manufacturing Construction dation and Real estate and communi- Education Other quarrying water supply storage insurance restaurant cation Q1 1.0 0.0 0.2 0.1 0.3 0.6 0.4 0.2 0.7 0.2 0.5 0.4 1.3 3.7 Q2 0.7 0.1 0.4 0.0 0.4 0.9 0.5 0.1 0.9 0.2 0.7 0.5 1.3 4.2 2019 Q3 0.2 0.0 0.2 0.0 0.4 0.8 0.5 0.1 0.5 0.2 0.8 0.5 1.4 3.9 Q4 0.2 0.1 0.1 0.0 0.4 0.5 0.4 0.2 0.5 0.2 0.4 0.5 1.3 3.6 Q1 0.9 0.1 0.1 0.0 0.5 0.7 0.5 -0.2 0.2 0.2 0.4 0.3 0.8 2.2 Q2 1.6 0.0 -0.5 -0.1 0.3 -0.2 -0.3 -0.6 -1.7 0.1 0.2 0.3 -1.7 -3.7 2020 Q3 -0.7 0.0 -0.2 0.0 0.6 0.5 -0.4 -0.7 -1.1 0.2 0.3 0.5 -1.2 -2.5 Q4 1.6 0.1 0.4 0.1 0.8 1.4 0.1 -0.8 -0.6 0.2 0.9 0.6 -0.5 0.0 Q1 0.1 0.1 0.2 0.1 0.4 0.8 0.6 -0.3 -0.8 0.3 0.9 0.4 0.8 1.8 Q2 -0.1 0.1 0.9 0.2 0.4 1.6 0.7 0.4 1.6 0.5 1.4 0.5 3.0 8.2 2021 Q3 0.1 0.2 0.9 0.2 0.4 1.6 0.5 0.5 1.4 0.1 1.0 0.3 2.8 6.7 Q4 -0.2 0.3 0.4 0.1 0.4 1.2 0.7 0.6 0.6 0.2 0.9 0.2 2.1 5.4 Q1 -0.1 0.3 0.3 0.0 0.4 1.0 0.8 0.4 0.7 0.2 1.2 0.4 1.6 5.1 2022 Q2 -0.4 0.2 0.3 0.1 0.3 1.0 0.6 0.2 0.7 0.2 1.0 0.3 1.4 4.3 Source: World Bank, based on data from Kenya National Bureau of Statistics Note: Other = Wholesale and retail trade + Public admistration + Proffessional, admistration and support services + Education + Health +Other services + FISIM Table A5: National fiscal position Actual (percent of GDP) 2017/18 2018/19 2019/20 2020/21 2021/22* Revenue and grants 17.4 17.7 17.1 16.0 17.5 Total revenue 17.1 17.5 16.9 15.7 17.3 Tax revenue 15.3 15.4 14.8 13.7 15.0 Income tax 7.2 7.0 6.7 6.1 6.9 VAT 4.0 4.2 3.6 3.6 4.1 Import duty 1.1 1.1 0.9 1.0 0.9 Excise duty 1.9 2.0 1.8 1.9 2.0 Other revenues 1.2 1.0 1.8 1.2 1.2 Railway levy Appropriation in aid 1.8 2.1 2.1 2.0 2.2 Grants 0.3 0.2 0.2 0.3 0.2 Expenditure and net lending 24.1 25.0 24.2 24.2 23.7 Recurrent 15.1 15.7 15.5 15.8 16.7 Wages and salaries 4.4 4.3 4.2 4.3 4.1 Interest payments 3.6 3.9 4.1 4.4 4.5 Other recurrent 7.1 7.6 7.1 7.1 8.1 Development and net lending 5.3 5.6 5.6 4.9 4.2 County allocation 3.7 3.7 3.1 3.5 2.8 Parliamentary service 0.3 0.3 0.3 0.3 0.3 Judicial service 0.1 0.1 0.1 0.1 0.1 Equalization of funds 0.0 0.1 0.0 0.0 0.0 Fiscal balance Deficit including grants (cash basis) -7.0 -7.3 -7.0 -8.2 -6.2 Financing 7.1 7.4 7.4 8.4 5.9 Foreign financing 3.1 3.1 4.2 5.5 4.7 Domestic financing 4.0 4.3 3.2 2.8 1.1 Total public debt (gross) 56.5 59.6 63.0 67.7 67.3 External debt 28.7 31.0 33.1 35.2 33.6 Domestic debt 27.8 28.6 29.9 32.5 33.6 Memo: GDP (Fiscal year current market prices, Ksh bn) 8,922 9,746 10,621 11,370 12,752 Source: 2022 Draft Budget Policy Statement (BPS) and Quarterly Budgetary Economic Review (first quarter, Financial Year 2021/2021), National Treasury Note: *indicate Preliminary results; ** projection December 2022 | Edition No. 26 29 Table A6: 12-months cumulative balance of payments BPM6 Concept (US$ million) 2022 2018 2019 2020 2021 (August)* A. Current Account, n.i.e. (5,048) (5,541) (4619) (6027) (6268) Merchandise A/C (10,201) (10,679) (8430) (11439) (12756) Goods: exports f.o.b. 6,088 5,872 6,062 6,730 7,249 Goods: imports f.o.b. 16,289 16,551 14,492 18,169 20,005 Oil 3,386 3,310 2,185 3,480 5,252 Services 1,596 1,767 355 740 1,741 Services: credit 5,477 5,621 3,732 4,859 6,712 Services: debit 3,881 3,854 3,377 4,120 4,970 Income 3,557 3,371 3,456 4,673 4,746 B. Capital Account, n.i.e. 263 208 131 195 197 C. Financial Account, n.i.e. (6,547) (6,233) (2,950) (6,892) (6,173) Direct investment: net (1,463) (1,132) (499) 4 (591) Portfolio investment: net (627) (1,312) 1,279 (135) 913 Financial derivatives: net 11 (5) (73) (35) Other investment: net (4,457) (3,789) (3,730) (6,762) (6,495) D. Net Errors and Omissions (720) 154 38 (308) (1,560) E. Overall Balance (1,030) (1,059) 1,427 (788) 1,427 F. Reserves and Related Items 1,030 1,059 (1,426.8) 787.7 (1,427.2) Reserve assets 885 905 (818.5) 1,127.5 (1,334.1) Credit and loans from the IMF (145) (154) 608.3 846.7 132.6 Exceptional financing - - - (507) Gross Reserves (US$ million) 11,516 12,851 12,992 14,199 11,828 Official 8,231 9,116 8,297 9,491 7,873 Commercial Banks 3,286 3,735 4,695 4,708 3,955 Imports cover (36 months import) 5.3 5.5 5.1 5.6 4.4 Memo: Annual GDP at Current prices (US$ million) 92,203 100,556 100,996 110,290 116,805 Source: Central Bank of Kenya 30 December 2022 | Edition No. 26 Table A7: Inflation Year Month Overall Inflation Food Inflation Energy Inflation Core Inflation January 4.7 1.6 12.1 3.4 February 4.1 1.1 11.4 3.1 March 4.4 2.8 8.8 3.1 April 6.6 8.2 7.5 3.1 May 5.5 6.3 6.7 3.0 June 5.7 7.0 6.3 2.9 2019 July 6.3 8.5 6.2 2.7 August 5.0 7.1 4.0 2.3 September 3.8 6.3 1.3 2.1 October 5.0 12.4 3.0 1.7 November 5.6 13.3 3.2 1.8 December 5.8 14.4 4.1 2.0 January 5.8 14.9 4.7 2.2 February 6.4 9.6 5.5 2.3 March 5.5 11.9 4.5 1.9 April 5.6 11.6 4.9 2.0 May 5.3 10.6 5.0 1.8 June 4.6 8.2 5.4 1.6 2020 July 4.4 6.6 6.1 2.0 August 4.4 5.4 7.6 2.1 September 4.2 5.2 7.6 1.9 October 4.8 5.8 8.2 2.5 November 5.3 6.1 7.8 2.9 December 5.6 7.2 8.1 2.9 January 5.7 7.4 8.7 2.7 February 5.8 6.9 10.1 2.7 March 5.9 6.7 11.1 2.7 April 5.8 6.4 10.5 2.7 May 5.9 7.0 10.0 2.8 June 6.3 8.5 9.5 2.8 2021 July 6.4 8.8 8.2 3.0 August 6.6 10.7 6.5 2.7 September 6.9 10.6 7.6 2.9 October 6.5 10.6 7.0 2.4 November 5.8 9.9 7.2 2.0 December 5.7 9.1 7.2 1.9 January 5.4 8.9 6.0 1.9 February 5.1 8.7 4.7 2.0 March 5.6 9.9 4.3 2.2 April 6.5 12.2 6.2 2.4 May 7.1 12.4 6.2 2.6 2022 June 7.9 13.8 7.0 3.0 July 8.3 15.3 6.3 3.1 August 8.5 15.3 6.6 3.4 September 9.2 15.5 8.8 3.6 October 9.6 15.8 9.4 4.0 Source: World Bank, based on data from Kenya National Bureau of Statistics December 2022 | Edition No. 26 31 Table A8: Credit to private sector growth (%) Total Private Building and Transport and Finance and Mining and Private house- Consumer Business Other Year Month sector annual Agriculture Manufacturing Trade Real estate construction communication insurance quarrying holds durables services activities growth rates 32 January 3.0 -0.2 6.5 6.6 1.4 -6.5 15.4 -2.6 -14.5 5.6 15.4 0.0 -27.2 February 3.4 -2.6 7.7 6.4 2.6 -0.7 13.1 -2.9 -13.4 6.6 16.1 0.3 -33.1 March 4.3 0.2 7.2 8.7 -7.0 5.7 10.2 -0.1 -11.4 8.0 13.9 -0.4 -31.7 April 4.9 2.5 7.9 8.4 -6.5 6.4 13.3 -0.7 -12.5 7.9 16.4 1.1 -29.6 May 4.4 2.7 6.5 7.6 -4.1 6.2 6.7 -0.5 -7.9 7.8 18.0 -1.2 -32.0 June 5.2 3.9 11.4 5.5 -6.3 5.8 4.7 1.0 -4.3 7.6 21.3 -3.2 -22.6 2019 July 6.1 7.6 10.3 8.0 -5.4 6.4 5.3 0.5 -13.5 7.1 23.6 1.6 -17.2 August 6.3 6.6 7.5 8.4 -6.0 5.8 8.2 2.4 -10.8 8.6 23.0 -0.1 -14.4 September 7.0 5.5 7.5 7.6 -5.3 5.0 14.5 2.2 -5.1 8.8 28.4 3.2 -13.6 October 6.6 -5.2 6.4 10.2 -5.5 4.8 15.1 0.4 0.1 5.3 28.6 -0.4 12.7 December 2022 | Edition No. 26 November 7.3 -6.1 7.5 8.8 -6.1 9.8 15.8 1.9 -3.2 6.1 25.9 -0.3 30.9 December 7.1 -2.4 9.2 8.9 1.6 8.1 0.4 1.5 -5.8 5.6 26.0 2.4 16.0 January 7.5 -4.8 12.7 6.0 4.0 9.9 -1.1 3.5 -9.4 5.6 21.4 1.5 24.4 February 7.8 0.2 10.4 9.5 -0.5 7.4 1.9 3.4 -14.6 5.9 20.6 2.4 33.4 March 9.0 1.4 15.3 9.4 9.5 7.1 6.6 2.2 3.9 3.4 24.1 3.3 36.8 April 9.1 2.8 20.1 10.3 7.7 9.1 3.1 4.8 11.0 2.2 19.6 1.2 14.3 May 8.3 2.6 18.2 8.0 5.7 5.7 8.4 4.4 5.8 3.2 16.7 2.7 16.9 June 7.7 2.2 11.1 9.4 4.6 14.9 3.2 4.9 10.0 3.6 15.2 5.3 -3.7 2020 July 8.0 1.1 10.0 9.1 5.5 20.7 3.5 5.0 11.3 5.4 13.8 3.2 -6.7 August 8.4 0.9 13.1 8.1 5.2 19.0 4.6 6.8 12.0 5.1 13.7 3.4 -7.6 September 7.7 1.7 12.6 6.6 4.1 20.6 -3.3 6.6 8.2 3.5 15.6 4.1 -5.8 October 7.7 17.0 7.8 2.5 8.2 21.1 -2.2 7.6 -14.2 7.3 15.7 5.9 -10.4 November 8.2 19.3 10.0 4.0 7.4 17.5 0.2 9.1 -15.4 6.2 18.8 2.7 -14.5 December 8.5 15.3 12.0 3.8 3.4 13.6 7.1 8.7 -12.9 4.3 18.1 4.0 14.0 January 9.3 15.6 12.6 5.5 2.5 14.4 14.0 8.8 -6.1 4.7 18.7 6.5 5.8 February 9.6 13.4 15.8 3.9 5.2 19.0 9.0 8.8 21.6 4.2 20.3 5.0 3.8 March 7.7 12.3 10.7 2.1 2.9 17.4 7.5 7.7 -3.6 2.9 17.6 5.7 5.2 April 6.7 10.0 4.0 0.9 3.4 13.3 7.6 5.8 -8.8 4.5 19.3 7.2 24.3 May 6.9 4.3 1.5 3.8 4.5 16.3 6.7 5.7 -18.1 3.1 22.0 6.9 39.8 June 7.6 3.7 8.1 1.9 2.0 11.8 11.5 4.0 -13.0 3.2 23.4 5.2 65.2 2021 July 6.0 2.8 9.4 1.3 0.4 0.2 8.9 3.2 -22.1 2.4 21.7 4.9 58.0 August 6.9 1.4 9.3 2.7 1.7 11.8 7.7 2.8 -23.1 2.0 20.1 5.8 56.0 September 7.6 3.3 9.8 4.7 0.5 10.9 11.7 2.9 -8.4 2.6 17.6 7.6 59.5 October 7.7 2.7 10.9 5.5 -0.5 9.6 8.9 2.4 6.2 2.7 16.5 8.2 64.1 November 7.6 1.3 11.5 6.1 2.8 8.3 7.1 1.1 8.3 3.3 15.3 10.8 55.2 December 8.5 0.5 13.1 8.5 1.9 14.3 5.8 0.6 42.9 3.7 15.0 9.5 38.9 January 8.7 1.3 9.7 9.6 2.9 20.7 3.5 0.5 24.9 4.3 14.6 8.4 46.8 February 9.0 3.0 7.6 8.9 7.9 24.1 3.6 0.7 -10.7 5.0 14.0 11.6 49.7 March 10.8 7.7 9.9 10.4 6.4 25.0 3.6 0.5 -4.9 7.5 15.6 14.7 60.5 April 11.4 6.4 12.0 10.7 8.2 28.9 5.8 0.8 28.3 6.7 16.1 12.2 53.6 2022 May 11.9 11.6 15.5 9.1 9.0 26.5 5.3 0.8 47.9 7.5 15.1 11.3 57.5 June 12.3 12.5 15.2 11.6 13.9 22.2 6.5 0.5 28.5 6.1 14.7 15.2 57.2 July 14.2 10.8 16.1 15.2 14.1 27.0 2.8 1.7 78.6 7.6 14.8 16.9 69.8 August 12.5 19.2 15.2 13.3 11.5 13.5 1.2 1.0 97.2 7.8 14.3 16.1 60.8 Source: Central Bank of Kenya Table A9: Mobile payments Number of Number of Value of Year Month Number of agents customers transactions transactions (Millions) (Millions) (Billions) January 201,336 40.3 154.2 368.0 February 212,252 50.0 144.5 328.2 March 226,957 50.4 161.4 368.4 April 230,220 52.1 155.8 360.2 May 224,825 52.2 153.3 364.3 June 222,484 46.8 149.7 346.9 2019 July 222,087 53.9 153.0 366.4 August 222,479 54.8 151.8 368.5 September 224959 55.7 151.2 365.9 October 223176 56.3 156.1 366.9 November 222211 58.0 153.1 359.3 December 224108 58.4 155.0 382.9 January 231292 59.2 150.2 371.9 February 235543 58.7 148.5 350.5 March 240261 58.7 150.7 364.5 April 242275 59.4 125.0 308.0 May 243115 60.2 135.9 357.4 June 237637 61.7 143.1 392.2 2020 July 234747 62.1 157.8 451.0 August 252703 62.8 163.2 473.5 September 263200 64.0 163.3 483.2 October 273531 65.3 174.1 528.9 November 275960 65.8 170.0 526.8 December 282929 66.0 181.4 605.7 January 287410 66.6 173.9 590.4 February 294111 67.2 164.2 568.0 March 293403 65.9 182.3 537.8 April 294706 67.1 173.4 502.2 May 298883 67.8 180.8 536.7 June 301457 67.8 175.8 532.6 2021 July 303718 68.5 184.0 588.0 August 304822 68.1 184.5 586.5 September 305831 67.7 180.9 585.4 October 295105 66.9 190.1 618.1 November 299053 67.2 186.0 601.0 December 298272 68.0 189.8 622.1 January 299860 68.3 181.9 585.8 February 301108 67.9 171.4 568.7 March 302837 68.6 195.8 664.3 April 295237 68.7 188.2 663.5 2022 May 305830 70.0 193.0 692.6 June 304693 70.3 186.2 665.1 July 309856 71.6 194.8 722.5 August 310450 70.1 184.8 677.4 Source: Central Bank of Kenya December 2022 | Edition No. 26 33 Table A10: Exchange rate Year Month USD UK Pound Euro January 101.6 130.8 116.0 February 100.2 130.3 113.8 March 100.4 132.3 113.5 April 101.1 131.8 113.6 May 101.2 130.1 113.2 June 101.7 128.8 114.7 2019 July 103.2 128.8 115.8 August 103.3 125.6 115.0 September 103.8 128.2 114.4 October 103.7 133.7 114.4 November 102.4 132.0 113.2 December 101.0 132.9 112.7 January 101.1 132.2 112.3 February 100.8 130.8 109.9 March 103.7 128.5 114.7 April 106.4 131.9 115.6 May 106.7 131.3 116.1 June 106.4 133.4 119.8 2020 July 107.3 135.3 122.5 August 108.1 141.9 127.8 September 108.4 140.9 128.0 October 108.6 140.9 127.9 November 109.2 144.1 129.1 December 110.6 148.4 134.3 January 109.8 149.7 133.8 February 109.7 151.8 132.6 March 109.7 152.2 130.9 April 107.9 149.3 129.1 May 107.4 151.1 130.4 June 107.8 151.4 130.1 2021 July 108.1 149.4 127.9 August 109.2 150.9 128.6 September 110.2 151.5 129.8 October 110.9 151.6 128.6 November 111.9 151.0 127.9 December 112.9 150.2 127.6 January 113.4 153.6 128.4 February 113.7 153.7 128.8 March 114.3 151.0 126.2 April 115.4 150.1 125.5 2022 May 116.3 145.1 123.0 June 117.3 144.8 124.1 July 118.3 141.8 120.7 August 119.4 143.5 121.0 Source: Central Bank of Kenya 34 December 2022 | Edition No. 26 Table A11: Nairobi securities exchange (NSE 20 Share Index, Jan 1966=100, End - month) Year Month NSE 20 share index January 2,958 February 2,894 March 2,846 April 2,797 May 2,677 June 2,633 2019 July 2,628 August 2,468 September 2,432 October 2,643 November 2,619 December 2,654 January 2,600 February 2,337 March 1,966 April 1,958 May 1,938 June 1,942 2020 July 1,804 August 1,795 September 1,852 October 1,784 November 1,760 December 1,868 January 1,882 February 1,916 March 1,846 April 1,867 May 1,872 June 1,928 2021 July 1,974 August 2,021 September 2,031 October 1,961 November 1,871 December 1,903 January 1,889 February 1,887 March 1,847 April 1,801 2022 May 1,682 June 1,613 July 1,701 August 1,751 Source: Central Bank of Kenya December 2022 | Edition No. 26 35 Table A12: Central bank rate and Treasury bills Year Month Central Bank Rate 91-Treasury Bill 182-Treasury Bill 364-Treasury Bill January 9.0 7.2 8.9 10.0 February 9.0 7.0 8.6 9.6 March 9.0 7.1 8.3 9.4 April 9.0 7.4 8.1 9.4 May 9.0 7.2 7.9 9.3 June 9.0 6.9 7.6 9.2 2019 July 9.0 6.6 7.4 8.8 August 9.0 6.4 7.1 9.2 September 9.0 6.4 7.1 9.6 October 9.0 6.4 7.2 9.8 November 8.5 6.6 7.6 9.8 December 8.5 7.2 8.2 9.8 January 8.3 7.2 8.2 9.8 February 8.3 7.3 8.2 9.9 March 7.3 7.3 8.1 9.2 April 7.0 7.2 8.1 9.1 May 7.0 7.3 8.2 9.2 June 7.0 7.1 7.9 8.9 2020 July 7.0 6.2 6.7 7.6 August 7.0 6.2 6.6 7.5 September 7.0 6.3 6.7 7.6 October 7.0 6.5 6.9 7.8 November 7.0 6.7 7.1 8.0 December 7.0 6.9 7.4 8.3 January 7.0 6.9 7.5 8.4 February 7.0 6.9 7.6 8.8 March 7.0 7.0 7.8 9.1 April 7.0 7.1 7.9 9.4 May 7.0 7.2 8.0 9.4 June 7.0 7.0 7.6 8.4 2021 July 7.0 6.6 7.1 7.5 August 7.0 6.6 7.1 7.4 September 7.0 6.8 7.3 7.8 October 7.0 7.0 7.4 8.1 November 7.0 7.1 7.7 8.7 December 7.0 7.3 7.9 9.1 January 7.0 7.3 8.1 9.5 February 7.0 7.3 8.1 9.7 March 7.0 7.3 8.1 9.8 April 7.0 7.4 8.3 9.7 May 7.5 7.7 8.7 9.9 2022 June 7.5 7.9 9.1 10.0 July 7.5 8.2 9.3 10.0 August 7.5 8.6 9.4 9.9 September 7.5 8.9 9.6 9.9 October 8.3 9.1 9.7 9.9 Source: Central Bank of Kenya 36 December 2022 | Edition No. 26 Table A13: Interest rates Short-term Long-term Year Month Overall 91-Treasury Central Average Interest Interbank Savings weighted Bill Bank Rate deposit rate Rate Spread lending rate January 3.3 7.2 9.0 7.3 5.1 12.5 5.2 February 2.5 7.0 9.0 7.3 5.2 12.5 5.2 March 3.7 7.1 9.0 7.2 5.1 12.5 5.3 April 4.2 7.4 9.0 7.2 4.7 12.5 5.3 May 5.6 7.2 9.0 7.2 4.7 12.5 5.3 June 3.0 6.9 9.0 7.2 4.8 12.5 5.3 2019 July 2.3 6.6 9.0 7.0 4.8 12.4 5.4 August 3.7 6.4 9.0 6.9 4.5 12.5 5.6 September 6.9 6.4 9.0 7.0 4.6 12.5 5.5 October 6.9 6.4 9.0 7.0 4.4 12.4 5.5 November 4.2 6.6 8.5 6.6 4.5 12.4 5.8 December 6.0 7.2 8.5 7.1 4.0 12.2 5.1 January 4.4 7.2 8.3 7.1 4.3 12.3 5.2 February 4.3 7.3 8.3 7.1 4.2 12.2 5.1 March 4.4 7.3 7.3 7.1 4.2 12.1 5.0 April 5.1 7.2 7.0 7.0 4.2 11.9 4.9 May 3.9 7.3 7.0 7.0 4.2 11.9 5.0 June 3.3 7.1 7.0 6.9 4.2 11.9 5.0 2020 July 2.1 6.2 7.0 6.8 4.1 11.9 5.2 August 2.6 6.2 7.0 6.6 4.1 12.0 5.3 September 2.9 6.3 7.0 6.4 3.8 11.8 5.3 October 2.7 6.5 7.0 6.3 3.4 12.0 5.7 November 3.3 6.7 7.0 6.3 3.4 12.0 5.7 December 5.3 6.9 7.0 6.3 2.7 12.0 5.7 January 5.1 6.9 7.0 6.3 2.7 12.0 5.7 February 4.5 6.9 7.0 6.5 3.4 12.0 5.6 March 5.2 7.0 7.0 6.5 3.5 12.0 5.6 April 5.1 7.1 7.0 6.3 2.7 12.1 5.8 May 4.6 7.1 7.0 6.3 2.5 12.1 5.8 June 4.6 7.0 7.0 6.4 2.5 12.0 5.6 2021 July 4.2 6.6 7.0 6.3 2.5 12.1 5.8 August 3.1 6.6 7.0 6.3 2.6 12.1 5.8 September 4.7 6.8 7.0 6.3 2.6 12.1 5.8 October 5.3 7.0 7.0 6.4 2.6 12.1 5.7 November 5.0 7.1 7.0 6.4 2.6 12.1 5.7 December 5.2 7.3 7.0 6.5 2.6 12.2 5.7 January 4.3 7.3 7.0 6.5 2.5 12.1 5.6 February 4.7 7.3 7.0 6.6 2.6 12.2 5.6 March 4.8 7.3 7.0 6.5 2.5 12.2 5.7 April 4.1 7.4 7.0 6.6 2.6 12.2 5.6 2022 May 4.6 7.7 7.5 6.6 2.5 12.2 5.6 June 5.0 7.9 7.5 6.6 2.5 12.3 5.7 July 5.5 8.2 7.5 6.7 2.9 12.4 5.6 August 5.4 8.6 7.5 6.9 3.5 12.4 5.5 Source: Central Bank of Kenya December 2022 | Edition No. 26 37 Table A14: Money aggregate (Growth rate y-o-y) Year Growth rates (yoy) Money supply, M1 Money supply, M2 Money supply, M3 January 7.5 8.4 10.3 February 5.6 7.5 10.1 March 11.7 10.7 12.2 April 7.1 8.9 10.7 May 6.7 8.5 8.8 June 10.8 10.0 9.5 2019 July 5.4 7.5 7.5 August 5.5 6.4 6.7 September 6.0 7.4 7.1 October 3.2 6.9 7.8 November 3.4 6.0 6.3 December 2.9 5.9 6.0 January 4.0 6.4 6.1 February 7.4 8.6 8.4 March 5.0 7.0 7.7 April 6.0 8.1 8.9 May 7.2 8.8 10.0 June 7.3 9.6 9.1 2020 July 11.4 11.7 11.1 August 12.9 11.4 11.1 September 14.0 10.9 10.6 October 18.3 11.7 11.7 November 20.9 13.6 14.1 December 13.3 12.1 13.3 January 13.0 11.3 13.3 February 10.6 9.9 12.3 March 7.8 8.2 10.3 April 7.7 8.1 9.4 May 8.0 7.5 8.0 June 5.4 5.5 6.9 2021 July 6.3 6.3 7.4 August 10.1 8.9 10.1 September 6.4 7.5 8.8 October 4.8 6.9 7.5 November 3.5 6.4 7.3 December 7.1 5.8 6.2 January 4.2 5.0 5.0 February 5.7 5.4 5.0 March 4.6 5.5 5.3 April 8.9 6.9 7.3 2022 May 8.0 6.4 7.2 June 7.3 5.8 7.7 July 12.5 5.8 8.0 August 4.6 3.4 5.5 September 7.4 4.6 6.1 Source: Central Bank of Kenya and World Bank 38 December 2022 | Edition No. 26 Table A15: Coffee production and exports Exports value Year Month Production MT Price KSh/Kg Exports MT KSh Million January 4,167 453 3,469 1,499 February 5,724 449 4,567 1,903 March 4,057 298 4,351 2,256 April 5,307 203 4,552 2,501 May 4,084 201 5,490 2,700 June 2,021 192 4,549 1,964 2019 July 672 197 5,115 1,713 August 1,647 217 3,932 1,462 September 1,522 233 3,145 1,113 October 2,541 260 3,986 1,390 November 1,117 332 3,664 1,176 December 771 435 1,906 634 January 3,049 439 2,639 985 February 4,410 427 3,169 1,687 March 4,845 422 4,604 2,410 April 2,242 295 4,396 2,590 May 1,125 276 4,313 2,279 June - 502 5,414 2,956 2020 July 1,310 358 3,546 1,799 August 1,209 525 3,182 1,484 September 1,913 484 3,391 1,607 October 1,329 527 2,732 1,322 November 1,318 568 3,594 1,837 December 1,667 660 2,405 1,285 January 3,824 697 2,129 1,342 February 5,325 664 3,481 2,161 March 4,318 544 6,065 4,557 April 2,196 436 3,337 2,307 May 4,430 3,010 June 502 551 3,437 2,272 2021 July 1,278 674 2,696 1,764 August 1,479 684 2,504 1,658 September 1,889 664 2,480 1,735 October 999 671 2,432 1,674 November 3,539 775 2,170 1,740 December 2,816 789 2,314 1,919 January 5,990 762 3,239 2,634 February 6,271 730 4,618 3,546 March 6,646 571 4,067 3,416 April 1,846 519 5,749 4,468 2022 May 491 424 5,903 4,877 June 304 627 4,945 3,818 July 2,111 664 5,179 3,824 August 4,380 637 3,213 2,482 Source: Kenya National Bureau of Statistics December 2022 | Edition No. 26 39 Table A16: Tea production and exports Exports value Year Month Production MT Price KSh/Kg Exports MT KSh Million January 48,386 234 48,623 11,831 February 31,445 216 41,027 9,638 March 26,462 214 42,457 9,910 April 26,131 228 36,884 8,631 May 37,759 242 36,994 9,293 June 42,425 219 29,355 7,154 2019 July 31,458 205 33,657 7,788 August 37,200 218 41,276 9,458 September 35,533 229 36,325 8,463 October 46,305 242 45,374 11,065 November 45,087 235 43,650 10,735 December 50,660 225 39,312 9,484 January 53,636 232 48,770 11,452 February 49,201 214 47,570 11,022 March 55,733 207 51,441 11,665 April 49,656 225 57,722 13,193 May 47,004 210 48,594 11,289 June 46,378 198 46,399 10,293 2020 July 36,554 194 46,851 10,014 August 38,525 217 47,035 10,269 September 43,413 220 44,725 10,200 October 48,275 215 43,656 9,937 November 47,680 218 46,353 10,611 December 54,412 215 46,167 10,301 January 48,896.13 223 48,812 11,379 February 43,398.65 230 50,390 11,726 March 48,692.71 219 53,432 12,673 April 44,299.46 207 51,899 11,576 May 45,321.64 205 50,042 11,071 June 43,468.95 196 43,993 9,548 2021 July 34,732.37 189 43,844 9,204 August 33,635.04 230 44,421 9,874 September 43,185.49 244 36,308 8,566 October 48,956.89 268 40,078 10,316 November 50,719.16 278 45,318 12,181 December 52,526.36 296 47,922 12,725 January 48,683.03 294 45,585 12,629 February 40,825.99 311 44,093 13,303 March 46,321.07 301 46,044 13,559 April 41,171.30 304 43,446 12,769 2022 May 50,093.25 280 47,380 13,777 June 43,268.31 286 46,795 13,693 July 33,854.27 280 45,584 13,465 August 42,940 12,604 Source: Kenya National Bureau of Statistics 40 December 2022 | Edition No. 26 Table A17: Local electricity generation by source Geo- Co- Year Month Hydro Thermal Wind Solar Total thermal generation January 279 417 114 148 8 0 966 February 254 374 99 146 7 0 880 March 283 445 99 144 8 0 979 April 192 398 181 142 8 0 921 May 243 427 110 164 8 0 952 June 272 413 146 92 7 0 932 2019 July 269 440 133 125 7 0 975 August 251 425 132 151 7 0 968 September 234 454 105 153 8 0 953 October 268 494 70 137 8 0 977 November 299 482 62 114 8 0 965 December 361 464 62 46 8 0 940 January 358 477 55 90 8 0 986 February 342 431 54 100 7 0 934 March 359 460 56 86 8 0 969 April 298 412 36 88 8 0 841 May 319 392 56 106 8 0 881 June 334 421 62 88 7 0 913 2020 July 358 433 61 110 7 0 969 August 358 424 71 119 7 0 977 September 356 381 89 140 7 0 973 October 373 440 80 122 8 0 1023 November 385 397 60 148 8 0 997 December 400 393 77 135 7 0 1012 January 330 465 75 138 7 0 1015 February 281 422 106 110 7 0 926 March 305 461 63 200 8 0 1037 April 308 425 60 165 7 0 964 May 369 385 116 130 8 0 1008 June 318 409 84 185 7 0 1003 2021 July 286 463 123 153 13 0 1037 August 274 453 109 190 17 0 1043 September 262 440 107 187 18 0 1014 October 309 388 118 201 23 0 1039 November 293 378 135 196 23 0 1025 December 339 349 167 131 28 0 1014 January 320 311 206 156 32 0 1026 February 244 305 224 123 30 0 926 March 243 410 170 202 35 0 1061 April 229 441 126 179 31 0 1006 2022 May 284 521 80 153 33 0 1071 June 265 494 83 181 28 0 1051 July 252 521 104 208 25 0 1111 August 257 513 121 186 22 0 1099 Source: Kenya National Bureau of Statistics December 2022 | Edition No. 26 41 Table A18: Soft drinks, sugar, galvanized sheets and cement production Soft drinks litres Galvanized sheets Year Month Sugar MT Cement MT (thousands) MT January 53,585 53,060 20,124 485,178 February 55,218 46,139 22,749 470,146 March 61,413 45,463 26,313 507,037 April 58,230 35,312 23,214 501,921 May 53,086 36,307 22,501 486,301 June 46,074 28,545 24,667 477,432 2019 July 47,149 25,097 23,260 527,115 August 49,248 32,835 21,918 512,470 September 53,234 33,356 22,641 519,370 October 47,586 35,259 22,619 504,615 November 50,715 30,900 21,871 479,085 December 55,398 38,662 22,547 496,517 January 52,654 53,155 23,397 530,404 February 42,072 51,083 21,989 548,818 March 52,109 52,699 18,527 559,424 April 35,951 45,468 6,259 509,197 May 34,129 46,350 18,042 511,961 June 47,273 49,680 23,730 594,421 2020 July 39,833 53,155 24,493 666,341 August 39,290 53,434 23,226 712,701 September 52,436 54,873 20,801 707,033 October 47,215 54,830 22,868 731,253 November 42,916 50,227 23,268 668,507 December 64,707 38,834 20,854 666,855 January 50,153 58,044 18,631 669,530 February 42,749 61,508 20,762 612,980 March 53,157 66,194 21,781 721,444 April 43,742 58,404 21,572 695,953 May 40,266 57,796 21,165 717,669 June 48,457 58,968 22,365 698,424 2021 July 33,864 57,513 20,343 876,998 August 43,744 64,134 19,662 896,825 September 53,383 45,347 17,479 866,344 October 53,394 49,899 20,111 892,975 November 56,226 60,022 25,926 807,553 December 58,453 62,333 20,348 791,050 January 51,384 64,839 21,546 855,883 February 50,561 64,191 19,671 818,496 March 61,159 79,448 23,989 911,250 April 68,508 842,239 2022 May 752,698 June 768,716 July 785,317 August 753,968 Source: Kenya National Bureau of Statistics 42 December 2022 | Edition No. 26 Table A19: Tourism arrivals Year Month JKIA MIA TOTAL January 113,050 15,740 128,790 February 106,198 12,761 118,959 March 93,571 20,159 113,730 April 103,522 4,769 108,291 May 98,596 3,591 102,187 June 122,122 6,650 128,772 2019 July 149,994 8,520 158,514 August 148,816 10,988 159,804 September 121,668 9,199 130,867 October 138,033 11,157 149,190 November 108,755 12,315 121,070 December 119,646 12,373 132,019 January 113,082 12,205 125,287 February 106,352 11,086 117,438 March 43,346 3,950 47,296 April 9 - 9 May 94 - 94 June 422 2 424 2020 July 475 1 476 August 16,091 671 16,762 September 18,979 761 19,740 October 27,809 1,173 28,982 November 30,062 1,149 31,211 December 43,226 3,109 46,335 January 43,234 3,045 46,279 February 32,047 3,005 35,052 March 37,214 3,194 40,408 April 27,850 3,037 30,887 May 32,153 1,735 33,888 June 46,494 2,038 48,532 2021 July 64,493 4,532 69,025 August 72,291 6,257 78,548 September 66,667 3,633 70,300 October 67,608 5,201 72,809 November 71,271 5,435 76,706 December 82,867 7,637 90,504 January 63,277 6,655 69,932 February 67,560 6,390 73,950 March 76,366 5,073 81,439 April 77,379 3,949 81,328 2022 May 87,058 3,429 90,487 June 103,332 4,834 108,166 July 109,766 6,423 116,189 August 94,231 7,908 102,139 Source: Kenya National Bureau of Statistics Note: JKIA (Jomo Kenyatta International Airport, MIA (Moi International Airport) December 2022 | Edition No. 26 43