ECONOMY HEADS SOUTH

The Kenyan economy which just last year was riding historic highs and on its way to recording an unprecedented 7 per cent growth has like its big western counterparts hit the brakes hard. Growth this year is projected at 4.5 per cent and that is optimistic.

The largest contributor to GDP, Agriculture with 25 per cent, is in turmoil. Farmers do not want to deliver maize to millers holding out for better prices while government is working hard to stave off popular unrest over current high prices of maize flour. It is a tough balancing act with government having to step in and subsidize consumers from its already thin budget.

Coffee and Tea are in crisis with poor global prices and unrest in some of the sectors further hindering progress. Horticulture may be the only bright spot but this is also dealing with high fertilizer prices and has been hard hit by the high electricity prices which have plagued the country since June. Flowers typically have to have halogen lamps beamed on them 24 hours in greenhouses.

Although transport and communication has been growing, the manufacturing sector has not been doing so well in light of high fuel and power prices coupled with diminished demand as consumer purchasing power diminishes rapidly.

Tourism which accounts for just 1.44 per cent of GDP but is nonetheless an important source of foreign exchange and remittances from Kenyans abroad has not been faring well.

The government's fiscal budget for the year 2008/2009 is in shambles. Many of the areas it anchored its revenue projections on are proving unreliable beginning with the Kenya Revenue Authority. The taxman has already missed his first quarter revenues target and the climate is looking increasingly tighter. No less than the President himself has on time called on Kenyans to pay their taxes.

Much of the country's development budget is hinged on borrowed funds but these are not coming through. A Sh39billion international sovereign bond has had to be shelved while plans to raise Sh18.5billion via infrastructure bonds has also not materialized.

So what way forward?