Kenya’s business environment 'second worst' in the world - IMF

The International Monetary Fund (IMF) has revealed that Kenya’s business environment is the second worst in the world after Colombia.

In a report recently released, the international financial institution attributed the country’s business uncertainty to the risen political temperature in the country.

IMF’s World Uncertainty Index (WUI) notes that the economic and political uncertainty in the country has risen sharply by 84% to 0.628 points from 0.34 to the second quarter of 2021.

While coming up with the WUI, the IMF team noted the electioneering period in Kenya is one of the main sources of uncertainty with most investors fearing an outbreak of war after the elections.

With the opinion polls showing that the August 9 General Elections might be a hotly contested race pitting former Prime Minister Raila Odinga and Deputy President William Ruto, most investors have taken a wait-and-see approach before deciding to make big investment decisions in the country.

The Covid-19 pandemic is also said to be another reason for the uncertainty in Kenya’s market with the index rising to 0.452 in the second quarter when the country recorded its first Covid-19 case.

Central Bank of Kenya (CBK) Governor Patrick Njoroge, however, in an interview last year, noted that the Kenyan investment market is no longer threatened by rising political temperatures but by other unforeseen factors.

According to Njoroge, the country has gone through many political risks and it has learned to deal with them.

“Coronavirus is the one that is the unknown. The others are in the realm of known unknowns,” Njoroge said as reported by The Standard.

Surveys have however shown that investors are worried more about the Russia-Ukraine conflict and the impending elections than the pandemic.

Other than scaring investors, the political temperature is also expected to slow down the country’s economic growth despite registering a historic 6.8% growth in the first three months of the year.

The Kenya National Bureau of Statistics (KNBS) has shown that the earlier economic growth was attributed to economic activities following the government’s move to ease the Covid-19 containment measure.

Other factors that are likely to contribute to slow economic growth are the Russia-Ukraine war and the prolonged drought.