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The
Economic Freedom
Network

  

Kenya

Total Government Expenditures

Economic Freedom Rating

As a Percent of GDP
kenya.gif (3437 bytes)

No Data

Part 1: The Economic Freedom Ratings for the Components and Various Area and

Summary Indexes: 1975, 1980, 1985, 1990 and 1995.

(The numbers in parentheses indicate the actual values for the components.)

Components of Economic Freedom

1975

1980

1985

1990

1995

I. Money and Inflation

2.2

1.9

5.5

4.5

3.8

15.7

(a) Annual Money Growth (last 5 yrs.)

5

(12.5)

3

(15.1)

7

(8.5)

5

(13.6)

3

(16.5)

1

(b) Inflation Variablity (last 5 yrs.)

2

(9.3)

3

(6.1)

10

(1.2)

9

(1.4)

3

(7.9)

1

(c) Ownership of Foreign Currency

0

0

0

0

10

1

(d) Maint. of Bank Account Abroad

0

0

0

0

0

1

II. Government Operation

4.0

4.1

4.9

4.0

4.0

34.6

(a) Gov't Consump. (% of Total Consump.)

4

(21.2)

2

(24.2)

3

(23.3)

3

(23.1)

6

(17.8)

1

(b) Government Enterprises

4

4

4

4

4

1

(c) Price Controls

-

-

-

2

4

1

(d) Entry Into Business

-

-

-

-

5.0

1

(e) Legal System

-

-

-

-

0.0

1

(f) Avoidance of Neg. Interest Rates

4

8

10

10

4

1

III. Takings

2.2

5.0

3.7

5.9

6.3

27.2

(a) Transfers and Subsidies (% of GDP)

-

8

(2.3)

6

(4.7)

8

(2.8)

9

(1.9)

1

(b) Marginal Tax Rates (Top Rate)

0

(70)

1

(65)

0

(65)

3

(50)

3

(50)

1

(c) Conscription

10

10

10

10

10

1

IV. International Sector

4.5

3.7

3.6

3.8

7.1

22.5

(a) Taxes on International Trade (Avg.)

6

(5.5)

5

(6.1)

3

(7.4)

4

(6.3)

6

(5.0)

1

(b) Black Market Exchange Rates (Prem.)

5

(8)

4

(10)

7

(2)

6

(6)

7

(2)

1

(c) Size of Trade Sector (% of GDP)

8

(32.2)

7

(33.5)

5

(25.8)

6

(28.8)

8

(36.3)

1

(d) Capital Transactions with Foreigners

0

0

0

0

8

1

Economic Freedom Rating

3.3

3.9

4.3

4.6

5.3

Ranking of Country

72

52

51

56

61

 

Part 2: Recent Economic Indicators:

Population 1996:

31.8

Real Per Capita GDP

:

1995=

$1,188

(in millions)

(in 1995 U.S. dollars)

Annual Rate of Change (1985-96):

4.2%

Avg. Growth Rate:

1980-90=

0.4%

1990-95=

-2.0%

Economic Indicators:*

1988

1989

1990

1991

1992

1993

1994

1995

1996

Change in Real GDP: Aggregate

6.2

4.7

4.2

1.4

-0.8

0.4

3.9

4.4

-

: Per Capita

2.0

0.5

0.0

-2.8

-5.0

-3.8

-0.3

0.2

-

Inflation Rate (CPI)

11.2

12.9

15.6

19.8

29.5

45.8

29.0

0.8

-

Change in Money Supply: (M1)

1.3

13.0

27.2

15.0

47.1

27.4

12.6

3.8

-

: (M2)

8.0

12.9

20.1

19.6

39.0

28.0

31.5

16.4

-

Investment/GDP Ratio

25.0

24.7

24.3

21.3

17.4

18.4

19.6

22.0

-

Size of Trade Sector (% of GDP)

24.5

26.8

28.8

28.0

27.0

39.5

36.1

36.3

-

Total Gov't Exp./GDP Ratio

Central Government Budget

Deficit (-) or Surplus (+)

(As a Percent of GDP)

-4.4

-6.9

-4.0

-2.8

-0.4

-4.0

-3.4

-

-

Unemployment Rate

* The figures in this table are in percent form.

While Kenya’s economic freedom rating has risen during the last two decades, its ranking has declined slightly. Among the 115 of our study, it ranked 61st in 1995, down from 51st in 1980. Both its modest 5.3 rating and 1995 ranking indicate that it still has a long way to go.

Reductions in marginal tax rates (from 65% to 50%) and some deregulation of financial markets account for most of the rating improvement. Monetary and price stability continues to be a problem. There has been little privatization and inefficient government enterprises continue to exert a negative impact on the economy. The legal structure often operates in a discriminatory manner. Public officials have a great deal of discretionary authority that often reaches beyond the scope of the law. As the result, corruption is widespread and it contributes significantly to the cost of doing business.

Perhaps most significantly, the credibility of even the modest steps toward a market economy is very low—and with good reason. Responding to a recent drought, the president invoked the Emergency Powers Act in February 1997. This act provides the government with broad powers to regulate the prices of food products, control the movement of both goods and people, and determine what goods will be imported and exported. Actions of this type undermine the confidence of entrepreneurs and investors both at home and abroad. If this country is going to prosper in the future, fundamental structural reform will be required. At the moment, there is little sign that such a plan is on the horizon.


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Last Modified: Wednesday, October 20, 1999.