PRIME MINISTER’S TIME: STANDING ORDER NO. 40
THE STATE OF THE NATIONAL ECONOMY
Mr. Speaker Sir, I rise to make a Statement on the state of the economy of our Nation.
Mr. Speaker, last year, our economy grew by more than 5%. The growth was robust and broad-based, with agriculture, industry and the service sector expanding at a healthy pace. Inflation declined from over 15% in early 2009 to close to 3% by the end of last year. The Nairobi Stock Market boomed, with the NSE index nearly doubled from the low of 2500 in early 2009 to nearly 5000 at the end of last year.
This strong recovery was due to a degree to the rolling out of our Economic Stimulus Programmes, the aggressive execution of our infrastructure projects, and the skillful monetary management of the Central Bank. We were also blessed with good rains. But even more important, it was the optimism about the future of our country that the promulgation of the New Constitution engendered among all of us, Kenyans, that boosted confidence and hence investment.
We were poised to further accelerate our economic growth to close to 6% this year, with inflation remaining well within the single digit. This economic outlook is now subject to some downside risks.
Mr. Speaker,
Indeed, I want to repeat that our economy is now faced with some downside risks. But I am confident that as we – those of us in the Executive Branch of the Government, the Members of Parliament, and our citizens -- remain united to focus on the implementation of the Constitution and to address any risks ahead of us, the economy of our Nation will continue its strong recovery and achieve the Goals of our Vision 2030.
Mr. Speaker Sir,
There are some disturbing developments which will impact negatively on our growth in the following ways:
a) The price of crude oil in the international market has risen substantially, to a level well above $100 per barrel. While much of the recent rise in the oil price originated from the disturbances in North Africa and Middle East, for a policy maker, it would be imprudent to assume that the higher oil prices would be short-lived.
If the price remains at $100 per barrel for the rest of the year, Kenya’s oil import bill would be higher by about $700 million or 2% of GDP.
b) We are not expecting severe drought in this long-rains season but rainfalls may well be uneven and somewhat lower than normal. The international commodity price index has surpassed the peak recorded in June 2008. Our national food bill will therefore rise. On the other hand, the international prices of some of our major export commodities are projected to fall considerably this year. The higher oil price, together with lower international prices of coffee and tea, is estimated to lead to a deterioration of our terms of trade of 12% in 2011, compared with 2009. This means that Kenya needs to spend $12 more of our export earnings to buy $100 dollar of imported goods.
Mr. Speaker, these “external shocks” will certainly give rise to downward pressures to our economic growth and upward pressures to inflation. But the Government will take appropriate measures to cushion Kenyan households and Kenyan industries from these shocks. I assure you that the Government will ensure that there will be enough food and oil in the country.
We will protect the lives of the poor and the vulnerable people. We will not allow Kenya to go back to the period of double digit inflation. We will not allow free fall of our currency, the shilling. We have adequate foreign exchange reserves, and, if necessary, can quickly augment them. The Government is prepared to act, and act decisively.
I have instructed all relevant line Ministries and the Central Bank to formulate measures that will sustain our economic growth, to maintain economic stability, and to protect the poor and vulnerable. The Office of the Prime Minister will coordinate the implementation of these measures, and formulate a comprehensive program of action for adoption by Cabinet. We will then present this program to the Members of Parliament for their input.
Mr. Speaker Sir, in my view, even more important for keeping our economy on track is to assure all Kenyans and the world at large that the political situation in our country will remain stable. Whatever the wrangles there are at present, the political leaders -- you and us – should not allow it to divide the Nation. All of us must remain focused on enhancing the welfare of ordinary Kenyans.
We must pledge ourselves to the Kenyans that we serve, that we are committed to fully implementing the Constitution. It is our Constitution that has given us the hope and the optimism for our country. Fundamentally, it is the confidence that drive the economy. It is the confidence in our stability that invites local and foreign investments. It is new investments that will create jobs for our people.
Let us remain united as Kenyans.
Thank you.
Rt. Hon. Raila A. Odinga, EGH, MP
PRIME MINISTER
Wednesday, March 23rd, 2011
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