By Allan Olingo

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Kenya's Jubilee administration has its work cut out as, barring a reversal of the result, it begins its second term.

Sluggish economic growth, insecurity in parts of the country, and the rising cost of food are among the issues that President Uhuru Kenyatta and his administration must immediately address.

The President will also be expected to fulfil the pledges he made while on the campaign trail: He promised to boost investment in public infrastructure and technology to transform Kenya into a middle-income nation; to expand access to healthcare and education; and to create an additional 1.3 million jobs a year, among other issues.

Cost of living

Kenya’s inflation hit a five-year high of 11.7 per cent a few months before the August 8 General Election, as a combination of factors pushed up the cost of the maize, the country’s staple food. However there was a reprieve in July inflation, when it dropped to 7.47 per cent, as the government subsidised the price of maize flour.

“We have seen the importation subsidy of maize mitigate the effects of the high cost of food on the economy. But now this needs to be supported by the expected harvest. The subsidy scheme should also be based on farmer incentives to encourage more production,” University of Nairobi Economics lecturer Michael Chege said.

The government imported maize after the food crisis threatened to become a major campaign issue. So far it has imported more than 200,000 tonnes. 

A report by the Kenya Sugar Directorate showed that from January to April 2017, production of the commodity dropped to 172,722 tonnes, down from the 238,872 tonnes produced in the same period last year.

The Central Bank of Kenya Monetary Policy Committee retained its policy rate at 10 per cent at its meeting on July 17, with Governor Patrick Njoroge saying that the bank expected consumer price inflation to go below 7.5 per cent in the next two months. However, there are still risks of reduced harvest owing to failed crops and the armyworm invasion in some parts of the country.

Agriculture, which contributes 30 per cent of the country’s gross domestic product, dropped for the first time since 2009. The Jubilee administration will be expected to take urgent measures to salvage the sector that is critical to food security.

Public debt

When President Kenyatta took over in 2013, Kenya had a total public debt of $18 billion, or 42 per cent of the GDP. This has since increased to 52.6 per cent, and the overall public debt has increased by $6.08 billion to $40 billion.

Already the International Monetary Fund and other analysts have urged caution.

“It’s important they return to fiscal consolidation as that will reduce pressure on rates on domestic financial markets,” Armando Morales, the IMF resident representative in Kenya told Bloomberg last month.

John Ashbourne, the Africa economist at Capital Economics, said that the country’s debt is risky. “If we continue to see these debt levels rising, then Kenya could get into the dangerous zone pretty quickly. Already, we are seeing additional risks, within expected slowdown in 2017,” he said.

The government will now have the chance to monitor its debt sustainability. 

At the same time, the government’s budget deficit has widened to a revised estimate of 10.2 per cent of GDP in the 2016/17 financial year, from 7.2 per cent in 2015/16.

Economic growth and credit slowdown

Kenya’s GDP growth fell to 4.7 per cent year-over-year in the first quarter of this year, from 6.1 per cent in the preceding quarter.

There has been a 1.1 per cent point drop in agricultural output, the sharpest fall in the past eight years.

In May, the World Bank cut its growth forecast for Kenya to 5.5 per cent from six per cent, citing issues like the slowdown in credit to the private sector, drought, and the elections. In February, the IMF cut the growth forecast for Kenya to 5.3 per cent, from a prior estimate of 6.1 per cent, citing the credit slump.

The government will need to invest more in energy and road infrastructure to reduce transport costs and increase movement of goods and produce to spur economic growth. In the past four years, the tourism, agriculture, services and manufacturing sectors have grown, which will remain key to growth of the economy.

Education

During the campaigns, the Jubilee administration promised to make secondary education free.

“We want to ensure free education from Standard One to Form Four from January next year. The government has set aside $50 million to refurbish secondary schools. From January no child will pay fees,” President Kenyatta said during his campaigns.

The next three months will be crucial to lay the foundation for this, especially given the challenges of the free primary school programme at its introduction during former president Mwai Kibaki’s first term in office.

It will be interesting to see how the education will be funded given that the current budget does not have an allocation for it.

Security

In the past three months, Al Shabaab militants have run amok in the coastal region of Lamu and parts of North Eastern region. President Kenyatta’s second term would need either concerted efforts or a new anti-terrorism strategy to curb terrorism.

“We need a rethink of how we engage with localised terror attacks in this area. The current Operation Boni seems to be slow in yielding results,” Andrew Franklins, a security analyst said.

Governance

In his first term, President Kenyatta was accused of failing to stamp out widespread corruption that saw almost half of his Cabinet resign. Last year, the country dropped six places in the Transparency International’s Corruption Perceptions Index, ranking among the 30 most most corrupt countries in the world.

“If we are re-elected in August, there are some public servants who stole public funds and we shall arrest them,” said President Kenyatta last month.

It remains to be seen how he will manage this vice, having blamed long judicial procedures and slow investigations by the anti-corruption agency for the slow fight.