Publication: Kenya's Quest for Growth Stabilization and Reforms--But Political Stability?
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Date
2008-08
ISSN
Published
2008-08
Author(s)
Abstract
Kenya has long had a reputation of being
politically risky, manifested in corruption, uncertainty
about policies, and the importance of political connections
in doing business. Kenya began its economic liberalization
in 1993. Reform picked up speed after a tightening of aid
by donors on governance grounds and an attempt to
re-establish credibility following the costly Goldenberg
scandal uncovered in 1992. But tangible results in the
shape of favorable government debt dynamics and a pick up in
growth took a decade to materialize. The paper argues that
the peaceful presidential election and transfer of power in
December 2002 was central to the economic upswing after
2002. The subsequent decline in political risk was singled
out by the private sector as an important development. The
paper draws on an analysis of debt dynamics, the evolution
of domestic interest rates, and the latest Investment
Climate Assessment to present evidence on the criticality of
low political risk in facilitating good economic outcomes
after 2003. The December 2007 elections have highlighted
other aspects of political risk - ethnic and social tensions
with roots in inequality. The findings of this paper
underline the importance of establishing a foundation for
long-term political stability and social cohesion in view of
the disruptions following the December 2007 elections. This
process is likely to be at least as difficult and lengthy as
fundamental economic policy and institutional reform.
Link to Data Set
Citation
“Bandiera, Luca; Kumar, Praveen; Pinto, Brian. 2008. Kenya's Quest for Growth Stabilization and Reforms--But Political Stability?. Policy Research Working Paper No. 4685. © World Bank, Washington, DC. http://hdl.handle.net/10986/6813 License: CC BY 3.0 IGO.”
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