Mwaniki Wahome
19 February 2010
Nairobi — The current political stand-off over how to deal with corruption in government will not affect the growth of the economy.
Central Bank of Kenya governor, Njuguna Ndung'u, said while political environment was shaped by short term decisions, production was based on long term planning. Hence, he said, there was no need to revise the growth projections.
"The predictions (about economic growth) have not changed. The political climate is political climate. The economic focus has not changed because people do not essentially change their production processes," he said.
He, however, said an economic update was being worked out by the Ministry of Planning looking at various scenarios. "The ministry is working through several scenarios. One of the things about this growth focus is done by Kenya Institute of Policy Research Analysis, and we are waiting for their scenarios" he said.
Some experts are concerned that renewed hostilities between the two parties in the Coalition Government could adversely affect economic growth. According to estimates, the economy will grow at between 4 and 4.5 per cent this year on the back of anticipated increase in agriculture production and tourist arrivals.
The shilling received a battering, recording an eight month low against major currencies last week following the uncertainty brought about by renewed political hostility. The Orange Democratic Movement has already signalled intention to boycott Cabinet meetings, which experts say could affect the working of the government, hence slowing down its programmes.
However, Mr Ndung'u, said political cycles - mostly short term - were unlikely to affect the projected economic growth. "The market risks are reflected by the market, mostly from those we regulate (banks), which we then analyse and discuss with them," said Mr Ndung'u.
The governor dismissed the spill-over effects of the post-election violence in 2008 although the economy registered its lowest growth since 2002, posting a measly 1.7 per cent. However, there is hope if the meeting between President Kibaki and Prime Minister Raila Odinga next week yields positive results, which will calm the political climate.