CASE STUDY ECONOMY OF KENYA Kenya --Like much of sub-Saharan Africa, Kenya faces severe economic problems. A rising external debt, a declining currency, a low per capita income and a troublesome international financial climate represent some of the most significant challenges to the country since its independence. Kenya's population growth rate, the highest in the world, intensifies these problems. In the 25 years since independence, the Kenyan economy has generally performed well. Between 1964 and 1971 the economy grew at an average annual rate of 6.5 percent. During the same period, the newly developed industrial sector grew at a yearly rate of 8.2 percent, easily outstripping the dominant agricultural sector, even though the latter posted a healthy average annual growth rate of 4.2 percent. The result was a steadily improving per-capita income. As the economy expanded the central government rapidly expanded services. Since 1971 the economy has grown more slowly, but has weathered a series of domestic and international obstacles remarkably well. The Gross Domestic Product (GDP) has risen by at least 3 percent annually except in 1984. Despite the significant growth of Kenya's industrial sector, agriculture remains the foundation of the country's economic vitality, accounting for two- thirds of the GDP and providing a livelihood for 60 percent of the population. Coffee and tea are Kenya's principal agricultural exports. Coffee was the country's leading foreign currency earner until 1987. In that year, world coffee prices declined and coffee exports fell to $277.7 million, down from $445.6 million in 1986. Kenya is the third largest tea exporter in the world, after India and Pakistan. In 1987, tea exports earned $181.5 million. World market prices for tea have worked against Kenya's attempts to increase its export earnings. From 1978 to 1987, the country increased its tea exports by almost 60 percent, b ut its earnings rose by only 11 percent. Dropping world commodity prices have forced the country to double its efforts just to stay in place. The government has often ignored basic needs to earn foreign currency. Investments in the agricultural sector are devoted mainly to the increase of export sales rather than improving the Kenyan diet. About 83 percent of the country's agricultural production is exported, including 95 percent of its coffee. Socially, Kenya has made a lot of progress over the last decade, but it is also falling behind in some key indicators. The country has achieved 92 percent net enrolment and closed the gender gap in primary education, earning a top ranking in sub-Sahara Africa. At the same time, there remain great differences across regions. The worst threat to the country's economic health,

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however, is its unrestricted population growth. Its growth rate of 3.8 percent a year is the highestin the world. If growth continues at this pace the current population of 22 million will double in20 years. The government has initiated a range of programs and activities designed to reduce thegrowth rate.

As a result of the booming population growth, the country faces a serious unemployment problem, which the government admits will worsen over the next decade despite its best efforts.The government estimates the unemployment rate is now about 14 percent and acknowledgesthat it will rise to at least 20 percent by the year 2000. The problem is aggravated by a shortageof available arable land. More than two-thirds of the land is designated as arid or semi-arid landwhere agriculture is impossible without heavy investment in irrigation equipment.

To solve many of its problems, Kenya does not need to look outside its borders. Instead, itcan learn from within to replicate success. There is no shortage of achievements in areas such asmacroeconomic management, finance and ICT, where Kenya has not only fared well, but has

become a world leader and pioneer. If all sectors performed as well as these, the country would be a prominent emerging economy

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