By JOHN GACHIRI
High cost of living cut deeply into Kenyans’ disposable income which diminished their ability to save.
The Economic Survey 2013 shows that national
savings dropped marginally, while incomes increased at a slower pace in
2012 than in 2011.
The Gross National Disposable Income (GNDI) was
Sh3.66 trillion in 2012 from Sh3.28 trillion in 2011, a 12 per cent
increase against a 20 per cent increase registered between 2011 and 2010
when the GNDI stood at Sh2.73 trillion.
Overall there was a reduction in gross national
savings which stood at Sh419 billion, a marginal 2 per cent drop from
Sh427 billion over same period.
Economists say that in general Kenya has a low
level of savings mainly because there are very few people who have
steady incomes that are large enough to allow for more income other than
for survival.
The salaries of these few workers also have to be shared with other dependants, which further reduces savings.
“It is a factor of employment and dependency ratio,” said Kwame Owino, chief executive of the Institute of Economic Affairs.
The increase in the cost of food, which is the major expenditure item for Kenyan households, puts more pressure on incomes.
Mr Owino said that Kenya will find it hard to
achieve economic growth rates of 10 per cent per year as envisaged in
Vision 2030, Kenya’s blueprint to move the country to a middle-income
economy. Savings ordinarily provide capital to finance projects.
High interest rates and taxation also diverted
money that could have gone to savings to consumption. Analysts said that
the drop in savings could also mean that Kenyans are purchasing more
goods or consumer prices are rising faster as a result of increased
costs of production.
“People are over-consuming or the government is
over-taxing or both,” said Johnson Nderi, head of research at Suntra
Investment Bank.
Mr Nderi said that one factor that can explain a
drop in savings is a drop in interest rates which triggers spending over
saving, arguing that when interest rates were high and corresponding
deposit rates were in double-digits, and the the situation could have
acted as incentive for consumers to forego consumption and save.
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