As a norm each month of June, the three East African countries (Kenya,
Although the global financial crisis and the consequent recession have seen the global economic growth contract by 1.3% in 2009, analysts project that the world economy will grow by 1.9% in 2010 due expected reversal of the adverse effect of the recession. Sub-Saharan Africa’s gross domestic product (GDP) is however expected to slow down to 2.4% from 5.7% in 2008.
In East Africa,
With the stimulus package in mind, the three East African countries have increased their budgets despite the harsh economic realities. In Kenya, East Africa’s largest economy, government spending in the year through June 2010 is set to increase by 14.7%, while
While studying Economics at university, I learnt that an economy is like a household (that is, a household best illustrates a perfect unit of the entire Economy.) Using the basic principle that a household uses, the government (as the head of the household) is supposed to ensure growth of the economy. It beats logic that at a time when the economy is facing tough financial times, the government should increase expenditure (albeit on borrowed money) instead of cutting on costs. This increases the government’s deficit levels and may cause bigger problems further down the line e.g. an increase in interest rates.
The cost of running bloated governments in East Africa, especially
A closer look at the stimulus packages announced in the budgets indicates that the monies allocated to the specific activities may end up in personal coffers rather than ‘stimulating’ the intended sectors. In
A lot of internal borrowing was mentioned in the budget readings, with Kenya and
As much as East Africa’s economies need to be cushioned from the adverse effects of the global recession, it’s clear that our governments cannot afford a stimulus plan like the one witnessed in developed countries. Lack of a productive capacity in our economies has literally turned us into ‘beggars for aid’ at the mercies of the external financers.
Throwing big monies to inefficient (if not corrupt well connected) firms in the name of a stimulus plan is not the way to go for our countries. Perhaps a more sober look at the issue would be to improve on our agricultural sustainability and build the necessary infrastructures needed to enable a productive and efficient East Africa.