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Securing Kenya’s Future Growth: Policies to Sustain Inclusive Growth

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Kenya continues to experience steady economic growth, with real GDP expanding on average by 5.6 percent over the last five years (2014-2018). In 2019, however, economic activity has softened to 5.8 percent from 6.3 percent in 2018 according to the latest World Bank Kenya Economic Update. The moderation in growth is attributed to a slowdown in agricultural output and weak private sector investment. The medium-term growth outlook remains positive with a projected growth of 5.9 percent.

The report notes that Kenya’s overall macroeconomic environment is expected to remain stable with low inflation and a manageable current account deficit, which should be supportive of the inclusive growth agenda of the government. Headline inflation is within the government target range of 52.5 percent, while current account deficit has narrowed significantly due to lower imports, diaspora remittance inflows and improved tourism revenues. Nonetheless, interest rate caps have constrained the operating environment for the banking sector and reduced flexibility for monetary policy to support growth, if needed. The repeal of interest rate caps (if approved) is a welcome development that should eliminate what has been a powerful disincentive for banks to lend to SMEs and restore the potency of monetary policy.

While there is great commitment by the authorities to fiscal consolidation, weak domestic revenue mobilization and expenditure pressures pose a significant challenge to attaining planned fiscal adjustment, with actual deficit consistently exceeding target deficit. This calls for stronger adjustment measures by the government to place fiscal accounts back on a prudent trajectory. These should include actions to increase revenue, make revenue projections more realistic, and strengthen expenditure controls and cash management. In addition, measures to adjust the government’s borrowing plans are essential to rebalance the public debt portfolio towards lower cost and longer-maturity debt, hence reducing its vulnerability to market instability as well as creating fiscal space.

“The expansionary fiscal stance has resulted in the crowding out of private sector investment, an unanticipated rise in public debt, and a continuation of slower private sector credit growth,” said Felipe Jaramillo, World Bank Country Director for Kenya.

The report recommends further structural reforms to lift productivity durably.

“Structural reforms could include continued effort to ease barriers for SMEs growth, improving quality of education and skills development at all levels, empowering women, supporting R&D, technology adoption and digitalization” said Peter W. Chacha, World BankSenior Economist.

The Special Focus topic advances policies to support Kenya’s Digital Transformation. The report concludes that to secure Kenya’s digital future, there is need to “digitally enable” every individual, business and prepare the entrepreneurship ecosystem to capitalize on recent churning of innovative startup stage digital ventures. Legislations and regulations governing the digital economy needs to keep pace with technology evolution to enable growth and competition while protecting consumers. Furthermore, initiatives aimed at building a digitally-savvy workforce should be strengthened.

“It will be important for Kenya to ensure its laws and regulations keep up with the fast-paced digital evolution to grant every Kenyan an opportunity to participate in the digital economy,” said Casey Torgusson, World Bank Senior Digital Development Specialist and author of the special section on Kenya’s Digital Transformation. “Prioritizing and adequately financing partnerships with the private sector to enable investment in increased internet access, technology skills development and regional integration to maximize on the effects of a large single digital market will no doubt enhance Kenya’s position as a silicon savannah.”

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Health & Wellness

COVID-19 infections approaching highest rates ever

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COVID-19 infections are approaching their highest rates since the pandemic began just over a year ago, the head of the World Health Organization (WHO) reported on Friday. 

“Around the world, cases and deaths are continuing to increase at worrying rates”, said WHO Director-General Tedros Adhanom Ghebreyesus, speaking during his regular briefing. 

“Globally, the number of new cases per week has nearly doubled over the past two months. This is approaching the highest rate of infection that we have seen so far during the pandemic.” 

As of Friday, there were 138.5 million cases worldwide, and more than 2.9 million deaths. The pandemic was declared in March 2020. 

Tedros said some countries which had previously avoided widespread virus transmission are now witnessing “steep increases” in infections, with Papua New Guinea serving as an example. 

Concern for Papua New Guinea 

The Pacific island nation, which has a population of around eight million, had managed to keep the disease at bay. Up until the beginning of the year, there were less than 900 cases and nine deaths. 

Currently, more than 9,300 cases and 82 deaths have been recorded, and all 22 provinces have been affected. The country’s health Minister, Jelta Wong, who also briefed journalists, said half of all cases and deaths were reported in the last month alone, and health workers are increasingly among those infected. 

 “Our biggest challenge is seemingly to the late adaption or acceptance of the ‘new normal’ and the disbelief in the disease itself,” he said. “This overlaps into much infodemic – and conspiracies and misinformation on the safety and the efficiency of the vaccines.”  

The situation in Papua New Guinea, or PNG, is concerning, Tedros said, as it could lead to a much larger epidemic.  Late last month, Australia donated some 8,000 doses of the AstraZeneca vaccine to its neighbour, and an additional 132,000 doses were delivered this week through the COVAX solidarity initiative. 

Vaccine equity now 

Tedros said PNG was a perfect example of why vaccine equity is so important, an issue which the WHO chief and other senior UN officials have repeatedly highlighted. 

Earlier this week, UN Secretary-General António Guterres told the Financing for Development Forum that “to end the pandemic for good, we need equitable access to vaccines for everyone, everywhere.”  

WHO continues to assess the pandemic’s evolution. Its Emergency Committee on COVID-19 met this week and Tedros said he will receive its latest advice on Monday. 

Update on virus variants 

Monitoring of the COVID-19 virus variant first detected in India continues, WHO said on Friday. 

The B 1 617 variant, which has two mutations, emerged at the end of last year and cases have been reported in other countries across Asia and North America. 

“This is one variant of interest that we are following,” said Dr Maria Van Kerkhove, the agency’s Technical Lead on COVID-19. 

“Having two of these mutations, which have been seen in other variants around the world, are concerning because there’s a similarity in these mutations that confer increased transmissibility, for example. Some of these mutations result in reduced neutralization which may have an impact on our counter measures, including the vaccines.” 

Strengthening surveillance 

COVID-19 variants have been reported in the United Kingdom and South Africa, while a third that was first detected in Japan is circulating in Brazil and elsewhere. 

Dr. Van Kerkhove said WHO and partners have been bringing together countries, researchers and different networks, to strengthen global monitoring and assessment of the new coronavirus

“It’s really important that that assessment is robust so we understand what each variant of interest and variant of concern means for transmission, for severity and for impacts on diagnostics, therapeutics and vaccines”, she said. 

COVID-19 vaccines developed so far have been effective against the variants, she added, “but we want to have a system in place should there need to be a change in some of our counter measures going forward.”

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Environment

Green transformation will rival industrial revolution

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IMF chief Kristalina Georgieva and US Climate Envoy John Kerry discuss climate action on the CNN news channel. Image: IMF

The transition to a global economic model which will slow down climate change and create jobs will be the “biggest economic transformation since the industrial revolution” according to John Kerry, the US climate envoy.

Mr. Kerry expressed the view in a discussion with Kristalina Georgieva, the head of the International Monetary Fund as part of the 2021 Spring meetings of the IMF and World Bank.

They agreed that a “green and resilient recovery” from the COVID-19 pandemic is possible but economic growth globally is likely to be slow and uneven.

‘No bank will fund a new coal plant’

John Kerry: There are many ways that we can address the climate challenge in America. President Biden has put a $2 trillion plan on the table, which will result in 500,000 charging stations for electric vehicles being built in the country, thousands of electric buses, including school buses, and a target of 100 per cent carbon-free power, by 2035.

All these measures will generate actions in the private sector. The decisions of some of the largest financial institutions in the world are being driven by environmental, social and governance (ESG) factors, and trillions of dollars is going to be invested in this new sector to avoid sheer catastrophe. We’re way behind, but we believe that this is going to be the biggest economic transformation since the industrial revolution.

In Europe, no bank or financial institution or even private source will fund a coal-fired power plant, but we have to move away from coal faster. Many old coal-fired plants are operating at less than 50 per cent efficiency. They are losing money and are not even sending energy to the main grid. They could be phased out over a period of time. Gas will, to some degree, be a bridge fuel [to renewables].

The United States could help mobilize finance to reduce risk, and then bring more money to the table for a commercial investment in alternative fuel sources.

Kristalina Georgieva: At the IMF we have identified three pillars in the transition to a low-carbon economy. First of all, put a price on all carbon emissions. Today only 23 per cent of emissions are being priced. The average price is $2 per ton. By 2030, we need to be at $75 a ton.

Second, funding is needed for public investment in green infrastructure. The IMF can support countries in this regard. Five per cent of gross domestic product (GDP) invested now, would generate an additional 0.7 per cent growth every year. This means that the investment would pay for itself within 15 years and create at least 12 million net jobs.

The third, hugely important pillar, is to lessen the impact on those who are currently employed in the high carbon economy. For example, there must be a just transition for miners, so that they can have benefit from new job opportunities. If we raise revenues from carbon pricing, some of that money must be used to provide a buffer, to soften the pressure on those businesses that need to move away from carbon dependency. This is doable, and it must be done.

China and the US

John Kerry : Right now, China is saying that they are going to reach peak emissions by 2030, and that they may be able to reach that target earlier, maybe by 2025. The problem is that the current models shows China peaking but then basically staying at a plateau, rather than sufficiently lowering emissions.

Some 30 per cent of all the emissions on the planet are produced by China, so if we don’t see a reduction between 2020 and 2030, we lose the capacity to keep the global temperature to 1.5 degrees above pre-industrial levels, and we lose the capacity to hit net-zero carbon emissions by 2050.

Every nation must work together on this. If the United States went to zero emissions tomorrow, it wouldn’t make the kind of difference we need because we all have to reduce at the same time. That’s the struggle we’re facing.

China obviously has a need to continue to grow and to develop. We want that, and we’re not begrudging that. We want to work with China and other countries to make sure that they don’t make the mistakes that we made, and that we work together to develop new technologies such as hydrogen fuel, and biofuels for aircraft.

Doing nothing is too expensive

John Kerry: The United States is the number two emitter in the world. We need to do a better job at reducing emissions on an accelerated basis. President Biden is stepping up to do that.  He’s hosting a virtual climate summit in April, he has rejoined the Paris climate agreement, and he has put together a $2 trillion piece of infrastructure legislation.

Climate action means jobs, whether in the creation of new energy sources, or transitioning out of the existing ones, building new cars or retrofitting homes. Those are jobs for workers in all countries. We should embrace this.

The economists have warned us again and again: doing nothing is more expensive to our citizens, our taxpayers, than responding to the climate crisis. We spent $365 billion cleaning up after three storms a couple of years ago, but we haven’t invested the $100 billion in the Green Climate Fund that would have provided resilience and adaptation to climate change, and prevented some of that damage from being done. We’re just not making the right choices.

Kristalina Georgieva:  We’ve already started offering a helping hand, especially to countries devastated by natural disasters.  We have put measures in place to help countries to be in a better position when disaster hits. For example, we are discussing with our membership a provision that will make $650 billion available for countries to not only take the necessary measures to deal with the pandemic and its impact, but also to take on the investments necessary for transformation of their economy.

The urgency to act is evident, and vivid: over the last six months, 10 million people were displaced by floods and other forms of natural disasters. Fast-forward to a world in which there are more climate-related disasters, and more migration.
We have a chance to take advantage of a transformation for growth and for jobs. But we are also under tremendous pressure to prevent a future that would be bleak for those we love the most: our children and grandchildren.

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Human Rights

Human rights experts demand UAE provide ‘meaningful information’ on Sheikha Latifa

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United Nations independent human rights experts on Tuesday demanded that the United Arab Emirates provide “meaningful information” on the fate of Sheikha Latifa Mohammed Al Maktoum as well as assurances regarding her safety and well-being, “without delay”.

Sheikha Latifa, the daughter of the Emir of Dubai, and Prime Minister of the UAE, Mohammed bin Rashid Al Maktoum, was reportedly abducted while attempting to flee the country in 2018. In February, footage was released that reportedly showed her being deprived of her liberty against her will.

Independent rights experts, including the UN Special Rapporteur on violence against women voiced concern that since the February video, and subsequent official request for further information on her situation, “no concrete information has been provided by the authorities”.

“The statement issued by the Emirates authorities’ merely indicating that she was being ‘cared for at home’ is not sufficient at this stage”, they added.

The rights experts also said they were troubled by the allegations of human rights violations against Sheikha Latifa, and of the possible threat to her life.

Evidence of well-being ‘urgently required’

According to the information received, she continues to be deprived of liberty, with no access to the outside world, they added, noting that “her continued incommunicado detention can have harmful physical and psychological consequences and may amount to cruel, inhuman or degrading treatment”.

“Evidence of life and assurances regarding her well-being are urgently required”, the human rights experts urged, calling for independent verification of the conditions under which Sheikha Latifa is being held, and for her immediate release.

In addition to the Special Rapporteur on violence against women, the call was made by the members of the working groups on enforced or involuntary disappearances; and on discrimination against women and girls; as well as the Special Rapporteurs on torture and other cruel, inhuman or degrading treatment or punishment; and on extrajudicial, summary or arbitrary execution.

The Special Rapporteurs and Working Groups are part of what is known as the Special Procedures of the Human Rights Council. The experts work on a voluntary basis; they are not UN staff and do not receive a salary. They are independent from any government or organization and serve in their individual capacity. 

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