After five months, from today, the Cabinet secretary for Finance
will make a presentation before Parliament on the .......................................
budget and report growth figures for the financial year ending in June of this year.
budget and report growth figures for the financial year ending in June of this year.
As
one would anticipate, there will be an accompanying narrative on the
extent to which growth targets were reached as well as reasons for any
failure to reach economic goals.
For a regular follower
of these presentations around the budget, this may be another familiar
speech, with variations merely on the theme and emphasis for the coming
financial year.
What
will certainly be lacking will be an expansive report by the governors
of Kenya’s economy on the extent to which public spending and policy
choices were deliberately executed to expand the economic freedom for
Kenyans.
Having read the 2015 edition of the Index of Economic Freedom,
it is almost certainly clear why this conversation will likely be
avoided, and the reason is that Kenya’ is graded as a country with an
economy that is “mostly unfree”.
Kenya’s score
in the most recent edition is 55.6, resulting in a global rank of 122
out of 178 countries assessed in this report, and falling below the
global average score of 60.4.
Compared to peers at both
the regional and continental level, Kenya is still an average country
regarding economic freedom. Within the African region, Kenya is right in
the middle at twenty-third among 46 countries, and performs worse than
every full member of the East African Community (EAC), Burundi being the
exception and for largely understandable reasons.
Recognising
that there are real differences and circumstances that explain the
different scores, it is still relevant to examine more closely at what
Kenya’s scores portend for domestic economic policy-making.
CONSISTENT IMPROVEMENT UNLIKELY
A
dispassionate view of the ranking, and the trends over the 21 years the
index has been published must lead one to the view that despite its
huge potential, Kenya is not a great country in economic policy-making.
This conclusion is sobering, because 21 years of consistent refinement
and publication of this information presents sufficiently persuasive
data points.
In general, Kenyan firms and individuals
are not economically free, compared to other firms that they may have to
compete against globally.
At the same time, while
economies in the African continent are heralded as growing strongly, the
institutional and policy basis for that growth is not consistent with
an expansion of economic freedom.
This implies that
there is a higher than even chance that a majority of growing countries,
Kenya included, will not consolidate the growth episodes into a
consistent improvement for people’s lives.
Except for
Mauritius which ranks tenth globally and first on the continent, and
Botswana which is at position 36 and therefore moderately free, the rest
of the continent is unimpressive.
With the evidence
from nearly a quarter of a century, it is clear that the pervasive
poverty of the continent is related to the absence of economic freedom
for its citizens.
Back home, forecasts from the
National Treasury suggest that Kenya is primed to achieve annual growth
of six per cent within the next couple of years. Looking at the
conditions that obtain today, I am prepared to be pleasantly surprised
when this happens.
REBASING REVISITED
There
is the risk that the quest for one-time high growth would divert away
from the necessary discourse on the quality of economic policy, and
especially from the fact that policy should aim to expand economic
freedoms.
Familiarity with the Index of Economic
Freedom and the explanation of the drivers of Kenya’s poor performance
is a warning against believing national hype on the country’s general
economic standing.
The revision of national accounting
statistics suggested that Kenya’s economy is among the six largest in
the continent. This finding contrasts sharply with the fact that the
ranking in terms of economic freedom shows both the potential for
improvement and the degree to which regional comparisons would flatter a
country whose record is unimpressive in global terms.
Even
in regional terms, it’s unlikely that EAC countries should consider
Kenya the leader in economic policy making since it ranks nearly last on
the score.
Towards the end of the last year, some
Kenyans may have bought the unpersuasive argument that a sacrifice of
civil and political rights is necessary to attain security. That issue
will be litigated and the poverty of that idea will be evident over
time.
What the Index of Economic Freedom reveals,
however, is that in terms of effective expansion of economic freedom,
Kenya is not great and that it is perilous to believe our own hype.
There’s a lot of work to do to beyond talking a big game.
Kwame
Owino is the chief executive officer of the Institute of Economic
Affairs (IEA-Kenya), a public policy think tank based in Nairobi.
Twitter: @IEAKwame
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