Is Prof. Kindiki's New Year Message of Hope or Despair?

[Jimmy Gathu]

Today, our deputy president Prof. Kithure Kindiki posted the following on his Facebook account:

• The Kenyan shilling has strengthened against major currencies, inflation and interest rates have significantly declined, while the prices of fuel and essential household commodities are progressively reducing.
• In 2025, the Government is accelerating key interventions for microeconomic recovery, job and wealth creation as well as enhancement of household incomes.
• Sustained reforms targeting key value chains in agriculture, livestock, fisheries and the blue economy; completion of the first cohort of special economic zones, affordable housing projects, modern markets, ICT Hubs and County Aggregation and Industrial Parks will stimulate growth and drive up per capita income.
• By end of the year, Kenya’s ambitious Universal Health Coverage Program- Taifa Care- and the ongoing education reforms will go a long way in minimizing out of pocket expenses on health and education, leaving households with more disposable incomes.
• This is the year that the hard and difficult task of transforming our country will start yielding returns.

But do these factors really indicate economic recovery? Let’s dissect his arguments;

1. Strengthening of the Kenyan Shilling & Decline in Inflation and Interest Rates

• Pros: A stronger currency generally indicates a positive trade balance, which can reduce the cost of imports and help stabilize inflation. Similarly, lower inflation and interest rates are typically positive indicators of economic stability.
• Cons: A stronger shilling could also hurt exports by making them more expensive for foreign buyers. Furthermore, while inflation and interest rate reductions are positive, they need to be sustained over a longer period to truly demonstrate recovery. Short-term improvements might not be indicative of long-term stability.

But Kenya being a major importer, we can say that this is a positive trend.

2. Decline in Fuel and Household Commodity Prices

• Pros: Lower fuel and commodity prices reduce the cost of living for households, potentially improving disposable income and increasing consumer spending.
• Cons: Prices of essential commodities are volatile and influenced by global factors like oil prices and supply chain disruptions. The government cannot control these factors entirely, so sustainable price reductions require deeper structural changes in local production and supply chains.

3. Accelerating Microeconomic Recovery and Job Creation

• Pros: Policies targeting job creation, microeconomic recovery, and wealth creation are essential for reducing poverty and improving living standards. Focused interventions in key sectors like agriculture, fisheries, and the blue economy have the potential to stimulate growth.
• Cons: The effectiveness of these interventions depends on proper implementation, coordination, and support for small businesses. There's a risk of focusing on large-scale projects that may not directly benefit the broader population, especially in rural areas where unemployment and underemployment are common.

4. Reforms in Agriculture, Livestock, Fisheries, and the Blue Economy

• Pros: These sectors are critical to Kenya's economy and could drive growth, particularly if they benefit from innovation, sustainable practices, and better infrastructure.
• Cons: While the government is focusing on these sectors, historical challenges such as poor access to markets, infrastructure deficits, and low investment may continue to impede growth. Additionally, climate change remains a persistent threat to agriculture.

5. Completion of Special Economic Zones, Affordable Housing, and ICT Hubs

• Pros: The development of infrastructure, such as special economic zones and ICT hubs, can drive investment, create jobs, and enhance economic productivity. Affordable housing can also stimulate the construction industry and provide better living conditions for citizens.
• Cons: The success of these projects depends on proper funding, management, and long-term planning. Additionally, affordable housing projects could face land acquisition challenges, regulatory hurdles, or cost overruns. Special economic zones may not benefit the entire population if the focus is too narrow or concentrated in specific regions.

6. Universal Health Coverage (Taifa Care) & Education Reforms

• Pros: Universal health coverage and education reforms are key to improving long-term human capital development. Reduced out-of-pocket expenses will improve household income and reduce financial burdens on families.
• Cons: The implementation of these programs is complex and may face challenges related to funding, healthcare infrastructure (SHIF), and equitable access. Also, while education reforms are essential for improving the workforce, they may take time to show tangible results.

Conclusion:

The Deputy President's message provides a hopeful outlook for Kenya’s economic future, but the success of these initiatives will depend on their execution. Economic recovery requires sustained, multisector efforts and long-term stability, not just short-term improvements. Factors like political stability -Which in my opinion we lack, effective governance, infrastructure development, and global economic conditions will all play a role in determining the success of these efforts. The government must ensure that the benefits of these reforms are equitably distributed and reach the most vulnerable populations to achieve true economic recovery. So our government must really work on political stability.