Kenya’s ‘mostly unfree’ economy is an indictment of our policy priorities
What you need to know:
- 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.
- In general, Kenyan firms and individuals are not economically free, compared with other firms that they may have to compete against globally.
- Even in regional terms, it’s unlikely that EAC countries should consider Kenya the leader in economic policymaking since it ranks nearly last on the score.
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.
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 policymaking.
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 policymaking 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
