Inequality gap continues to hinder Kenya’s transition to upper middle economy

NAIROBI, Kenya - A new World Bank report has revealed that the wide gap in inequality continues to hinder Kenya's drive of becoming an upper-middle-income country.

The WB report titled, 'Tackling inequality key to Kenya's transition to upper-middle-income status'.

“It is with clear evidence that inequality slows long-term growth and when persistent, constraints worse-off segment of the population to lower welfare and productivity, which in turn limits their contribution to economic development,” World Bank says.

Despite the East African economic powerhouse - the WB says challenges of productivity and equity are stalling the transition.

The latest WB data shows that the country is ranked as -a middle-income economy, meaning its Gross National Income (GNI) per capita is between $1,036 and $4,045.

For it to make it to the upper-middle-income status, it means its GNI per capita has to reach between $4,046 and $12,535.

If Kenya achieves the above GNI rates then it will be joining the leagues of South Africa, Libya, Namibia, Botswana, and Gabon, African nations in the upper-middle-income status.

With the current status, Kenya is missing out on various opportunities like indexes to attract global lenders at lower interest rates with fewer restrictions.

The country could also experience reduced crime and poverty rates, and enjoy improved health and education services if it makes it to the upper class.

However, the global creditor notes that the path towards the attainment of the status is stagnating on the back of inequalities in economic prospects.

The lender further notes that inequality perpetuates itself across generations by reducing the impact of poverty reduction measures.

In recent years, the country’s growth has been driven by public investment and private consumption, according to the lender, with national savings and private investment falling behind.

“Consequently, the country has not yet achieved the productivity levels that helped other middle-income countries maintain a steady rise in incomes,” WB added.

Kenya needs to raise national productivity, the lender says the country will need to re-energize private investment by shifting the balance between public and private sectors.

This will in turn improve the business climate and level the playing fields between large and small firms, male and female-owned businesses and enterprises in the capital, and those in the counties.

It will also require the strengthening of institutions mandated to secure the benefits of free trade and fair competition, the lender says in part.
The country should also complement its progress in delivering good social services.

This is by focusing on improving outcomes for groups and regions that continue to lag in areas such as universal access to basic services like electricity, water, sanitation, transport, and digital broadband.

“These should go hand-in-hand with stimulating job creation by the private sector, that will, in turn, translate this improved welfare into productive and well remunerated economic activity,” World Bank.

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