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Kenya: Aid Freeze May Hurt Economy
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The East African Standard (Nairobi)
19 January 2008
Posted to the web 18 January 2008
James Anyanzwa And Reuters
Nairobi
THE threat of a freeze on aid by Western donors and opposition plans to boycott companies owned by President Kibaki's allies will delay the country's economic recovery, analysts say.
The European Parliament on Thursday asked for a halt on budgetary support until Kibaki and his challenger, who is accusing him of rigging the December 27 election, reach a political resolution to a crisis in which 650 people have been killed, and 300,000 displaced.
"Locally, we have an environment that is denying us a chance to generate money, which the Government needs. We are faced with a threat that the money they have received in support will not come," said Mr James Shikwati, executive director of the Inter Regional Economic Network.
The EU planned to give 383 million euros ($561 million) over 2008-2013. A decision to stop donations would however need the green light from all 27 members of the bloc.
Kenya receives miniscule aid compared to other African countries but a withdrawal of it by Western powers would be noticed by the investors and tourists.
The business community, civil society and religious leaders have all urged the two political leaders to sit down and talk and avert a bigger crisis.
"The business community has suffered immensely during the previous two weeks with loss of staff, property, opportunities and long term confidence," said Mr Steven Smith, chairman of the Kenya Association of Manufacturers.
"Whoever emerges out of the current stalemate will inherit a tattered economy that has been needlessly driven to its knees," Smith said in a statement on Friday.
The manufacturing fraternity is facing a downturn as the impact of post-election violence deepens.
"We are concerned the economy has lost a lot during this period and is set to lose more as the impact has far reaching implications," Smith said.
Smith said the business community has suffered immensely during the last two weeks with loss of staff, property, opportunities and long-term confidence.
Provisional estimates project a 20 per cent decline in manufacturing during the first quarter of the year.
Manufacturers allay fears that consumers might pay the ultimate price of the crisis as it emerges that the unrest led to disruption in supply chain networks sparking signals of looming price hikes.
"If this continues, Kenya and its people will be the ultimate losers," said Smith.
He said the losses will trickle to the rest of the country and lead to job losses and decrease in Government revenues and funding for programmes promised campaigns.
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Manufacturing has also been disrupted owing to congestion at the port of Mombasa and fuel shortages.
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