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Report: Kenya Improves on Growth and Poverty Indicators, but Governance Remains a Challenge

Thursday, June 27, 2013

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Kenya has recorded significant progress in improving policies and institutions for growth and poverty reduction, according to a new World Bank assessment released on Wednesday.

 Kenya is ranked top, with Cape Verde, in Sub-Saharan Africa on the latest World Bank Country Policy and Institutional Assessment (CPIA), which rates the performance of poor countries. Kenya’s overall score of 3.9 in 2012 is the highest among 40 countries in Africa, and reflects an improvement over a score of 3.8 in 2011.

“The CPIA shows that Kenya’s overall economic environment has improved over the past three years due to better economic management and proactive policies that increase opportunities for Kenyans to enjoy higher growth with equity,” says Diarietou Gaye, World Bank Country Director for Kenya. “The challenge for Kenya is to improve on other critical areas including the business regulatory environment and governance, which have led to missed opportunities for Kenya’s economic transformation and its progress towards middle income status.”

The CPIA examines 16 key development indicators covering four areas: (i) economic management, (ii) structural reforms; (iii) policies for social inclusion and equity; and (iv) public sector management and institutions. Countries are rated on a scale of 1 (low) to 6 (high) for each indicator. The overall CPIA score reflects the average of the 16 indicators.

The key gains for Kenya included strong monetary response in 2012, which enabled it to reduce inflation to 9.6 percent, from 14 percent in 2011, and also to stabilize the exchange rate. Moreover, the government has maintained fiscal discipline even in the face of recent economic shocks and budgetary pressures including spending on elections and security operations in Somalia. As a result, public debt as a share of Gross Domestic Product has declined to below 45 percent.  

But, there is increasing concern about investment climate reforms, which are essential for private-sector led growth and job creation. Since 2008, Kenya has gradually declined from a top performer in the Doing Business indicators, dropping from a global rank of 78 then to 121 in the 2013 rank. Indeed, the 2013 Doing Business noted that Kenya dropped in eight out of 10 indicators assessed, including in issuance of construction permits and enforcing contracts, leading to missed opportunities for implementing relatively minor improvements in the business regulatory environment.


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