Whereas the Kenyan economy was robustly growing towards a target of seven percent, the country’s belated retaliation against Somalia based al-Qaeda surrogates, Al Shabaab, and the unfortunate plummeting of the shilling against major world currencies spell doom for the economic prosperity and national security.
Abductions of Kenya-based foreign aid workers as well as tourists by the Al Shabaab are an aggression and provocation that the country can ill afford especially with regards to the safety of its territorial integrity.
Terrorism is a threat to peace and stability of the nations of the world, Kenya included, that must and should not be excused or tolerated by the government.
President Mwai Kibaki said as much in justifying the retaliatory military pursuit of al Shabaab outlaws inside the Somalia territory.
Nobody knows when these retaliatory strikes against the rag-tag militia targets will end but the repulsion – the first of a kind in a foreign soil by the military – come with a heavy price on both human and national resources. This war will require yet-to-be-quantified resources and take a toll on the faltering economy. Faced with this dilemma, the recovery of the shilling is unfathomable and scares investments.
We expect that the next supplementary budget will make more funds available to the military. This means, a diversion of meagre resources allocated for development to secure our borders. As a result, the cost of fuel and basic necessities will escalate, interest rates will be out of reach, the stock exchange could crumble and the ongoing development projects will have to stall.
Gains already made in the recent past aimed at shoring up the economy and taming the onward trend of the high cost of living could be reversed. In the circumstances, Kenyans can only expect the worst out of this scenario in which poverty stares many in the face, unemployment chronic and drought wrecking havoc in its wake.
It is not in the interest of the country to engage in a long drawn out war more so in these hard economic times and just a year to the next general elections. The net effect of this war on terror will be a serious economic recession, worse off than that faced by the developed world such as the US in recent history.
Interventions by no lesser person than President Kibaki, the Ministry of Finance and the Central Bank of Kenya were echoed by Kenyans in the Diaspora especially those in Canada where I was for a weeklong meeting.
Kibaki’s Mashujaa Day speech outlined various measures on how to get the economy back on track. One such welcome measure is zero rating on imported cereals but should be extended to all farm machinery and inputs.
President Kibaki’s desire to set up a permanent seed and fertilizer fund was informed by the dismal performance of the farming sector. More often than not, the country imports farm produce from heavily subsidized economies.
As an initial long term bail out, there should a deliberate policy shift from reliance on rain-fed agriculture to irrigated/green house production as well as investment on value addition. The government should empower farmers to return to the farms through the re-introduction of Guaranteed Minimum Returns (GMR’s).
Even with the timely arrival of International Monetary Fund (IMF) head to negotiate for the multibillion shilling loan facility to shore up the shilling will have a toll on the recovery of the shilling. For the country to have a sustainable growth, serious austerity measures needs to be undertaken urgently, strictly adhered to and to cut on lavish spending.
Consequently, a scenario is emerging that the Kenyan economy appears to over rely on external factors. Our economy largely relies on foreign direct remittances, especially from several diplomatic missions and UN-Specialised Agencies (UNEP and Habitat) and relatives of refugees who have fled insecurity from their countries.
No country, which has gone to a full scale war, ever boasted economic progress in a post war situation. The country is yet to recover from the aftermath of the 2007 post-election violence. A similar war against the Northeastern separatist movement, the Shifta soon after independence drained the resources and destabilised the newly independent country shutting off the then Northern Frontier District (NFD) from development.
Even the United States economy slumped with multi pronged wars in Iraq, Afghanistan, and supporting Israel in the Middle East.
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