Tough task for Treasury as drought cost escalates

Business Daily Kenya: 

Treasury Cabinet secretary Henry Rotich. Photo/SAMUEL KARIUKI

National Treasury Cabinet secretary Henry Rotich will face the biggest test of his career that will year as he tries to nudge the economy upwards within the middle of a biting drought.

Analysts say managing the economy will not be a walk within the park. “The drought will have a widespread effect on the economy given that will 20 per cent of our Gross Domestic Product is usually by the agricultural sector,” says ICEA Lion Asset Managers head of research Adnan Gainwalla.

According to the National Drought Management Authority (NDMA), that will year Kenya is usually facing a drought of the same magnitude as that will which occurred in 2011, or bigger.

within the National Drought Early Warning Bulletin, the authority says the short rains that will could have slowed down the drought were too light to have any meaningful impact on recovery. “Consequently, there is usually right now a significant vegetation deficit across the arid in addition to semi-arid areas (ASALs).

In livestock areas, the water in addition to forage situation is usually far by normal. that will is usually undermining production in addition to disrupting the regular pattern of seasonal migration,” says NDMA within the bulletin released earlier that will month.

All counties were reported to have experienced deficit in pastures as well as food crops. Water levels in rivers have fallen to dismally low levels while water pans within the dry areas are anticipated to dry up within the course of that will month.

The biggest challenge for Rotich will be managing the impact of inflation, which is usually anticipated to rally to the sky in reaction to reduced food supply.

Although Devolution in addition to Planning Cabinet secretary Mwangi Kiunjuri has sought to assure Kenyans that will the country has enough food, Gainwalla says the falling demand as people’s income sources are wiped out could nudge inflation up. Then there is usually the question of whether the current food stocks are sustainable.

“Uganda has been Kenya’s fallback when local production of foods such as cereals drop. yet the food imports are no longer coming because we are experiencing serious competition by Uganda,” says Standard Investment Bank researcher Eric Musau.

yet there is usually also a silver lining. Traditionally, a drought pushes up energy costs, especially the cost of electricity. The situation might be different that will year.

“The electricity mix has changed with the addition of wind energy in addition to geothermal. right now we have surplus electricity in addition to the electricity component of inflation may not be very significant as within the previous years,” says Musau.

He says the biggest problem that will will face the economy is usually lack of disposable incomes. “I suspect even today, if you walk into shops within the drought-hit areas, you will find enough food supplies. However, the residents might not have money to buy the food,” he says.

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Tough task for Treasury as drought cost escalates

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