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Recent economic history

At the time Kenya secured its independence, in 1962, the country contained approximately nine million inhabitants, the vast majority of whom lived in the countryside and supported themselves by farming. (A description of the economy and polity from this time till the early 1970s can be found in Leys, 1975; the subsequent period is covered in Mosley, 1991.)

In 1969, the Kenyan economy generated a total output valued at US$1.4 billion, in terms of the prices current in that year. This output provided an income for each Kenyan, on the average, of US$130 per year (see Tables 4.1 and 4.2). The structure of the economy, in the same year, is indicated by the proportion of the total marketed income arising in agriculture (35 per cent), industry (20 per cent), and services (46 per cent) (see Table 4.3): by the standards of developing countries with similar per capita incomes the proportion of income accruing to those in the service sector (primarily government) was rather high.

Thereafter, for the next ten years, the Kenyan economy grew quite rapidly. By 1979, average income per capita had risen to $370 in current US dollars; a better measure of the increase in the average is provided by data on GDP per capita in constant Kenyan Shillings (of 1987) from column 2 of Table 4.2; here the increase was from Kshs 4,400 in 1969 to Kshs 5,980 in 1979, an average yearly rate of growth of a little over 3 per cent. Surprisingly this welcome increase took place with little change in the relative size of the three different sectors; in terms of the incomes their participants earned, all sectors grew at approximately equal rates (see Table 4.3).

The decade of the 1980s was very different for Kenya. A succession of changes, some evident towards the end of the previous decade (a deterioration of prices for coffee and tea in world markets), others emerging only in the 1980s (the second oil price rise and the subsequent recession in the world at large; the expansion of petroleum refining in the Arabian Gulf at the expense of Kenya's refined exports; and the cueing off of trade with Tanzania and Uganda - all events beyond Kenya's control) harmed Kenya's economy. For a few years until 1982, the country was able to finance deficits in its balance of payments and accompanying shortages of foreign exchange by borrowing abroad (see Table 4.4), but by late 1981 external sources both private and governmental had been exhausted.

Short-term debt, particularly to the private sector, reached a peak in 1980, and the servicing of the debt, both show - and long-term, was approaching the level of annual borrowings, so that there was no longer a substantial net inflow of foreign funds (see Table 4.5, column 1). The private sector's account had fumed negative by 1983, indicating that on balance the private sector was exporting capital. In 1980, the total foreign debt was US$3.5 billion; its service in 1981 consumed 5.7 per cent of GDP, and 23 per cent of export earnings.

Table 4.1 Kenya: GDP 1969-1991

Year GDP (billions current KSh) GDP deflator (1987=100) GDP (billions KSh at constant 1987 prices) Official exchange rate (annual average conversion factor, KSh per $US) GDP (billions current $US)
1969 10 21.4 49 7.14 1.4
1970 11 24.7 46 7.14 1.5
1971 13 22.4 57 7.14 1.8
1972 15 22.4 67 7.14 2.1
1973 18 24.7 71 7.00 2.6
1974 21 28.8 74 7.14 2.9
1975 24 32.1 75 7.34 3.3
1976 29 38.2 76 8.37 3.5
1977 37 44.6 83 8.28 4.5
1978 41 46.1 89 7.73 5.3
1979 47 48.7 96 7.48 6.3
1980 54 53.5 100 7.42 7.3
1981 62 59.1 105 9.05 6.8
1982 70 65.8 107 10.92 6.4
1983 80 73.5 108 13.31 6.0
1984 89 81.0 110 14.41 6.1
1985 101 87.6 115 16.43 6.1
1986 117 95.4 123 16.23 6.7
1987 130 100.0 130 16.45 7.9
1988 149 109.1 137 17.75 8.4
1989 170 119.1 143 20.75 8.2
1990 199 131.3 152 24.08 8.3
1991 227 147.4 154 28.07 8.1

Sources:
1969-1989: World Bank, World Tables 1991, 1993
1990-1991: Republic of Kenya, [Economic Survey, 1992

Table 4.2 Kenya: GNP per capita 1969-1991

Year Population (millions) GDP per capita (KSh at constant 1987 prices) GNP per capita (current US dollars) Average rate of growth of GDP (% per year) Consumer Price Index (1987 = 100.0)
1969 11.1 4,400 130 n.a. 15.5
1970 11.5 4,000 130 -4.7 15.8
1971 11.9 4,800 160 22.5 16.4
1972 12.3 5,500 180 18.3 17.3
1973 12.8 5,500 180 5.8 19.0
1974 13.2 5,600 210 3.6 22.3
1975 13.7 5,500 230 1.3 26.6
1976 14.3 5,300 240 2.2 29.6
1977 14.8 5,600 270 9.4 34.0
1978 15.4 5,800 310 6.8 39.8
1979 16.0 6,000 370 7.5 43.0
1980 16.6 6,000 420 5.4 48.9
1981 17.3 6,000 430 4.1 54.7
1982 18.0 6,000 400 1.9 65.9
1983 18.6 5,800 350 1.5 73.4
1984 19.4 5,700 330 1.7 80.9
1985 20.1 5,700 310 4.3 91.5
1986 20.9 5,900 330 7.1 95.1
1987 21.6 6,000 340 5.9 100.0
1988 22.4 6,200 370 6.0 108.3
1989 23.3 6,200 370 4.6 118.9
1990 24.0 6,300 370 4.2 146.8
1991 24.5 6,200 330 2.2 175.7

Sources:
1969-1989: All columns except column 2: World Bank, World Tables 1991,1993
Column 2: GDP at constant 1987 prices (from Table 4.1) divided by population in column 1

Table 4.3 Kenya: GDP by sector 1964-1991

  GDP (at factor cost, billions of current KSh) Agricultural product (at factor cost, billions current KSh) Share of agriculture in GDP (%) Industrial product(at factor cost, billions current KSh) Share of industry in GDP (%) Manufacturing product (at factor cost, billions current KSh) Share of manufacturing in GDP (%) Services (at factor cost, billions current KSh) Share of services in GDP (%)
1964 n.a. n.a. 42 n.a. n.a. n.a. n.a. n.a. n.a.
1965 n.a. n.a. 37 n.a. n.a. n.a. n.a. n.a. n.a.
1966 n.a. n.a. 40 n.a. n.a. n.a. n.a. n.a. n.a.
1967 n.a. n.a. 38 n.a. n.a. n.a. n.a. n.a. n.a.
1968 n.a. n.a. 36 n.a. n.a. n.a. n.a. n.a. n.a.
1969 9.53 3.22 35 1.88 20 1.14 12 4.43 46
1970 10.38 3.46 33 2.06 20 1.24 12 4.86 47
1971 11.40 3.58 31 2.32 20 1.43 13 5.50 48
1972 13.78 4.85 35 2.81 20 1.56 11 6.12 45
1973 15.79 5.60 35 3.28 21 1.89 12 6.92 44
1974 18.78 6.64 35 3.89 21 2.39 13 8.25 44
1975 21.14 7.22 34 4.28 20 2.54 12 9.64 46
1976 25.56 9.69 38 4.76 19 2.88 11 11.12 43
1977 32.81 13.77 42 5.90 18 3.60 11 13.15 40
1978 35.60 13.14 37 7.15 20 4.39 12 15.31 43
1979 40.66 14.07 35 8.07 20 5.00 12 18.52 46
1980 45.97 14.98 33 9.58 20 5.90 13 21.40 47
1981 53.19 17.29 33 10.78 20 6.56 12 25.12 47
1982 60.99 20.35 33 12.16 20 7.45 12 28.48 47
1983 69.47 23.77 34 13.46 19 8.16 12 32.24 47
1984 77.46 26.27 34 14.66 19 9.22 12 36.53 47
1985 88.37 28.73 32 16.88 19 10.37 12 42.76 49
1986 102.30 33.80 33 19.01 19 12.17 12 49.49 48
1987 112.25 35.64 32 20.89 19 13.05 12 55.72 49
1988 127.82 40.78 32 24.67 19 15.06 12 62.38 49
1989 146.61 45.43 31 29.25 20 17.11 12 71.94 49
1990 170.81 47.7 27 34.0 20 20.0 12 89.1 52
1991 196.00 53.0 27 39.2 20 23.4 12 104.8 53

Sources:
1964-1968: Van der Hoeven and Vandermoortele, 1987, Table 2, p. 42
1969-1989: World Bank, World Tables 1991,1993
1990-1991: Republic of Kenya, Economic Survey, 1992

Table 4.4 Kenya: debt and debt servicing 1970-1991

Year Total debt outstanding (millions current US dollars) Official debt (millions current US dollars) Debt to IMF (millions current US dollars) Debt to World Bank(IBRD/IDA) (millions current US dollars) Private debt (millions current US dollars) Total debt as a percentage of GDP Service of total debt, annual total (millions current US dollars) Service of official debt (millions current US dollars) Service of private debt (millions of current US dollars) Total debt service as a percentage of GDP Total debt service as a % of total exports Service of official debt, as a % of government current revenue
1970 406 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1971 421 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1972 493 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1973 723 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1974 999 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1975 1,108 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1976 1,304 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1977 1,746 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1978 2,323 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1979 2,887 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1980 3,530 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1981 3,366 1,715 204 586 1,652 46 n.a. n.a. n.a. 5.7 23 n.a.
1982 3,798 2,068 342 742 1,730 51 n.a. n.a. n.a. 5.9 27 n.a.
1983 3,909 2,278 417 840 1,631 51 427 142 285 5.5 28 11.4
1984 3,927 2,569 380 1,032 1,361 50 489 188 301 6.3 29 14.9
1985 4,501 2,968 486 1,124 1,533 56 520 230 290 6.4 33 18.6
1986 4,665 3,237 431 1,179 1,428 55 564 279 285 6.7 30 18.8
1987 5,730 3,475 401 1,681 n.a. 73 792 354 n.a. 10.0 46 20.0
1988 5,757 3,476 455 1,646 n.a. 68 887 388 n.a. 10.5 44 20.2
1989 5,783 3,270 415 1,782 n.a. 69 862 500 n.a. 10.5 45 25.2
1990 7,006 3,657 482 2,056 n.a. 84 868 394 n.a. 10.5 84 19.9
1991 7,014 3,897 493 2,153 n.a. 89 566 385 n.a. 7.0 49 18.8

Sources:
Column 1: 1970-1980, 1987-1987-1991: World Bank World Tables 1991,1993
Column 1: 1981-1986, and Columns 2-11; Strack and Schönherr, 1989
Columns 2,3, 6, 7: 1987-1991: World Bank, World Debt Tables, 1993-4,
Column 12: column 8 divided by column 1, Table 4.8 (converted to US dollars by the exchange rate in column 4, Table 4.1)

In 1980 the Kenyan government was forced to turn to the World Bank for its first Structural Adjustment loan, amounting to US$70 million, bringing the country's indebtedness to the World Bank to nearly half a billion US$, or three-quarters of a billion when combined with that owed to the IMF (see Table 4.4). (This and succeeding programmes of stabilization are described in van der Hoeven and Vandermoortele, 1987, and in Mosley, 1991. The various conditions imposed on the Kenyan government from the first Structural Adjustment by the World Bank through the Financial Sector Adjustment Credit of July 1989 are listed in Mosley, 1991: 277-82, Table 16.4). In order to conserve foreign exchange the government increased controls on imports, restrained credit, and partially devalued the Kenyan Shilling. These measures enabled the country to cut the deficit on current account of its balance of payments by nearly US$300 million between 1980 and 1981, and by another US$250 million between 1981 and 1982 (approximately 4 per cent of GDP in each year). Nonetheless, the crisis continued and in 1983 Kenya found it necessary to accept the IMF's strictures, involving further reductions in the budget deficit and bank lending, increased agricultural prices and a successive, sharper devaluation. The IMF continued to advance loans, as did the World Bank, with its second structural adjustment loan of US$131 million, and subsequent sectoral loans: for agriculture, for US$60 million in 1986; for industry, for US$112 million in 1988; and for finance, for US$120 million in 1989 (World Bank, May 1990, Annex IIa). In line with these loans, other official loans were granted to Kenya, so that its current indebtedness is mainly of long-term liabilities assumed by the government of Kenya (see Table 4.5). The total debt, official and private, as of the end of 1989, was US$5.7 billion, representing 70 per cent of the annual value of GDP; public sector debt was US$5.0 billion.

Servicing the total debt in 1989 consumed US$490 million, almost exactly 40 per cent of total export earnings for the year (see Table 4.6); servicing the official debt consumed US$316 million, 17 per cent of the government's total revenues for the year. Loans and grants from abroad were considerably less than these sums; in total there was a net outflow from Kenya in 1989 of US$286 million, of which US$150 million was the contribution of Kenya's private sector to foreign creditors and US$139 the contribution of Kenya's government (see Table 4.6).

It is not easy for the citizens of a country, developing or developed, to change the structure of its economy while making such substantial contributions to foreigners. The resources that are needed for internal adjustment - be they adjustment from the public sector to the private; or from industry to agriculture; or within industry; or within agriculture; or wherever cannot also, at the same time, be devoted to satisfying the claims of outsiders. It is in the framework of competition for Kenya's scarce resources, and the pressure that this competition imposes on its government, that the pursuit of science and technology will have to be placed.

Table 4.5 Kenya: net transfers from abroad 1981-1990 (millions current US dollars)

Year Total net transfers Net transfers to official suppliers Net transfers to private suppliers Total flow of funds into country Non-debt creating flows Official grants Direct investment Total interest payments Interest payments on official debt
1981 n.a. n.a. n.a. 219 143 77 8.3 n.a. n.a.
1982 n.a. n.a. n.a. 234 131 78 3.4 n.a. n.a.
1983 70 140 -70 236 172 121 9.2 166 77
1984 51 298 -248 220 170 144 3.9 170 92
1985 -63 19 -82 119 178 140 12.7 182 107
1986 69 6 64 274 190 150 27.8 206 133
1987 -111 66 -177 n.a. n.a. n.a. n.a. 202 133
1988 -231 -61 -171 n.a. n.a. n.a. n.a. 192 132
1989 -286 -139 -150 n.a. n.a. n.a. n.a. 180 127
1990 -347 -213 -134 n.a. n.a. n.a. n.a. 164 120

Sources: Strack and Schönherr, 1989

Table 4.6 Kenya: balance of payments 1964-1991

Year Total exports of goods and services (millions current US dollars) Total imports of goods and services (millions current US dollars) Balance on current account (after transfers, private and official) (millions current US dollars) Net exports of oil and refined products (millions current US dollars) Share of coffee in exports (% of total earnings) Share of tea in exports (% of total earnings) Share of oil and refined products in exports (% of total earnings)
1964 n.a. n.a. n.a. n.a. 32.7 13.0 4.7
1965 n.a. n.a. n.a. n.a. 29.9 12.9 10.0
1966 n.a. n.a. n.a. n.a. 32.3 14.9 10.1
1967 n.a. n.a. n.a. n.a. 29.5 13.9 13.5
1968 n.a. n.a. n.a. n.a. 22.1 17.3 10.9
1969 n.a. n.a. n.a. n.a. 26.5 17.9 12.0
1970 506 580 -49 32 31.1 17.7 11.5
1971 529 699 -112 38 26.6 16.3 12.2
1972 581 687 -68 42 27.4 18.1 9.8
1973 706 862 -126 44 29.2 13.9 7.7
1974 971 1,311 -308 51 23.6 11.9 16.1
1975 1,011 1,280 -218 116 16.4 10.7 22.7
1976 1,143 1,282 -124 133 29.3 10.0 18.1
1977 1,594 1,633 28 171 42.5 14.9 15.1
1978 1,544 2,295 -661 205 33.7 17.1 16.3
1979 1,629 2,219 -498 185 28.7 16.3 17.7
1980 2,061 3,095 -886 223 22.2 11.9 31.1
1981 1,799 2,575 -558 445 21.3 11.9 30.7
1982 1,630 2,068 -302 375 26.5 14.2 26.0
1983 1,525 1,753 -45 263 25.3 19.5 19.6
1984 1.663 1,966 -123 206 27.0 25.1 17.4
1985 1,607 1,911 -110 199 29.7 24.7 14.0
1986 1,902 2,148 -37 156 n.a. n.a. n.a.
1987 1,739 2,447 -494 155 n.a. n.a. n.a.
1988 1,880 2,680 -454 175 n.a. n.a. n.a.
1989 1,935 2,905 -587 173 n.a. n.a. n.a.
1990 24.88b 50.91b -11.84b 2.80b 17.9 25.5 11.4
1991 32.59b 52.92b -6.35b 5.10b 13.6 23.7 15.8

Sources:
1964-1968: Van der Hoeven and Vandermoortele, 1987, Table 2, p. 42 and Table 4, p. 44
1969-1989: World Bank, World Tables 1991
1990, 1991: Republic of Kenya, Economic Survey, 1992
Note:
b signifies billions of Kenya Shillings


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