The Kenyan Economy has continued to lose momentum. Inflation has continued to eat the Kenyan citizens with the rise of household commodities in every wake up of a new dawn. What could be the issue?
What is a Recession?
Basically, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending.
Kenya as a country has been on of a kind. Her borrowing techniques have continued to wallow the economical constraints.
Kenya is weighed down by swelling public debt and faces the possibility of a debt crisis (where the government can’t repay what it owes).
Kenya’s current public debt stands at approximately 4.884 trillion Kenyan shillings (USD$49 billion) or 56.4% of the country’s gross domestic product.. This is up from 42.8% in 2008. In other words, the country owes more than half the value of its economic output (GDP).
The International Monetary Fund recommends that ratios of public debt to GDP should not be higher than 40% for developing countries.
To be fair, this level of debt is comparable to that of other developing economies. For example, South Africa’s ratio of public debt to GDP was 53.1% in 2017 (2008: 27.8%). Nigeria’s was 21.3% in 2017 (2008: 7.3%). Brazil, India and China all have ratios over 40%. However, the economies of these countries.
The prices of importing commodities have also hiked leave alone the cost of petrol that has also affected the transport industry. All commuters are forced to pay higher prices for transport even in places that used to be cheap.
Majority of the common wananchi are experiencing tough moments. The amount of money they earn from their day to day activities remain to be meagre as the level of expenditure keeps zeroing down in most household.
Some household that used to afford basic needs are also struggling to meet some of their basics as they narrow down to what is important in their key list. Clothing has been vividly seen a nuisance expenditure and majority keeps recycling their clothing.
This inflationary effect is bad for a country like Kenya, which imports more goods and services than it exports. The inflationary pressure is fueled by low domestic production. Kenya’s domestic production base has shrunk in recent years and manufacturing has dipped from 12.8% of the GDP in 2007 to a paltry 8.4% in 2017 owing to bad economic policies.