GLOBAL FINANCIAL CRISIS: IMPACTS, COPING MECHANISMS AND IMPLICATIONS IN KENYA. Dr. Mary Amuyunzu-Nyamongo & Ms. Alice Sereti Sinkeet

Transcription

1 GLOBAL FINANCIAL CRISIS: IMPACTS, COPING MECHANISMS AND IMPLICATIONS IN KENYA Dr. Mary Amuyunzu-Nyamongo & Ms. Alice Sereti Sinkeet African Institute for Health & Development (AIHD) A D I H CHANNELS OF TRANSMISSION (1) A decline in the demand for Kenyan exports Collapse of external institutions with links to Kenyan banks and other monetary institutions Decline in remittances as disposable incomes decline in the countries experiencing global recession Decline in tourism revenue through postponement and cancellation of bookings Source: Nyangito (January 2009) 1

2 CHANNELS OF TRANSMISSION (2) Reduced value of exports and increased cost of imports Depreciation of the Kenya shilling against the US dollar with adverse implications on transaction costs A fall in the stock markets A decline in international aid to the country and to non-governmental organizations MACRO-LEVEL IMPACT OF GFC Kenya s GDP recorded a major decline in 2008 of 1.6% due to three adverse shocks: effects of the global economic downturn which depressed Kenya s main export markets the erratic, delayed and shorter rainfall had a negative impact on the agricultural and energy sectors the prolonged effects of the 2008 post-election violence depressed investor confidence and had adverse effects on the whole Kenyan economy and population 2

3 REMITTANCES ( ) There was a rise in October 08 and slumped in Nov Dec 2008 The sources are North America 52% and Europe 30% The pick up in April 2010 indirectly attributed to improving economic conditions in the source regions, and improved prospects for economic recovery at home SOURCE: COMMENTARY ON REMITTANCES FOR APRIL 2010 MR. CHARLES GITARI KOORI, DIRECTOR RESEARCH DEPARTMENT INFLATION &GDP (2005 TO 2009) Inflation is closely linked to GDP growth Some of the effects of high inflation included high cost of food 3

4 GOVERNMENT RESPONSE Restoring investor confidence Expansionary fiscal policy (e.g. establishing an economic stimulus package) Monetary policy focusing on achieving and maintaining price stability within a single digit inflation rate of 5.0% The budget, with a focus on infrastructure and business, is aimed at job creation as a measure of addressing poverty GFC STUDY IN KENYA Data were collected in four sites with a total of 11,845 households: Tana River (July October 2010): 5,882 (poverty level at 72%) Murang a Municipal Council: 2,286 (39% below the poverty line) Kilifi Town Council: 2,649 (65% of the people classified as poor) Kisumu Municipal: 1,028 (48% live below the poverty line) 4

5 KENYA CBMS COVERAGE Total Number of HHs Covered by the CBMS Sites in Kenya CBMS Survey 1 st CBMS Site/Location Round Yr 2 Province District Sub location/wards 2007/ /20 10 Tarasaa Laini Walesorrhea Golbanti Makere Tana River Hirimani Kilifi Town Council Mavueni/Mkongani Coast Kilifi ward Murang a Municipal Council Central Murang a East Njoguini ward Kisumu Municipal Council Nyalenda A ward (Dago unit) Kaloleni/Shauri Moyo Nyanza Kisumu East ward Source: CBMS data ( ) KEY FINDINGS 5

6 IMPACT OF GFC ON REMITTANCES Few households received remittances Substantial declines experienced in Murang a, Kilifi and Kisumu Households affected by the crisis through remittances in the last six months Murang a Kisumu Kilifi Tana River Total Proportion of HHs that received n=2249 n=993 n=2617 n=5823 n=11,682 remittances from relatives working 2.3% 4.5% 0.6% 0.2% 1.9% abroad Proportion of HHs who saw a decline n=34 n=45 n=14 n=11 n=104 in remittances received 38.2% 24.4% 28.6% 0.0% 22.8% Proportion of HHs who experienced n=17 n=45 n=14 n=11 n=87 changes in schedule of remittances 17.6% 33.3% 35.7% 0.0% 21.7% received IMPACT OF DECLINE ON REMITTANCES Source: CBMS data ( ) 6

7 IMPACT ON EDUCATION Education Murang a a Kisumu Kilifi Tana River Total Proportion of HHs who transferred at least a child from private to public school n= % n= % n= % n= % n= % Proportion of HHs who cut back on education expenses n= % n= % n= % n= % n= 7, % IMPACT ON LOCAL EMPLOYMENT Local employment Murang a Kisumu Kilifi Tana River Total Proportion of HHs with n=2213 n=989 n=2571 n=5301 n=11,074 employed persons who experienced wage cut 1.4% 3.9% 2.7% 1.1% 2.2% Number of persons who lost jobs n= % n= % n= % n= % n=11, % Number of employed persons n=2225 n=991 n=2568 n=5284 n=11,068 who experienced reduced working hours 1.1% 1.7% 0.9% 2.5% 1.6% Proportion of persons who perform multiple jobs n= % n= % n= % n= % n=11, % Source: CBMS data ( ) 7

8 IMPACT OF JOB LOSS ON FOOD AND ACCESS TO SERVICES Source: CBMS data ( ) IMPACT ON INCOME Income proxies Murang a Kisumu Kilifi Tana River Total Proportion of households that experienced food shortage n= % n= % n= % n= % n=11, % Proportion of households who had balanced diet n= % n= % n= % n= % n=11, % 8

9 CHARITY, BORROWING AND SALE OF ASSETS AS COPING MECHANISMS ACCESS TO GOVERNMENT PROGRAMMES 9

10 CONCLUSIONS (1) The study population was not engaged in any major export activity that could expose them to inflation and currency depreciation The impact on tourism was not felt directly mainly due to the location of the four sites - although Kisumu and Kilifi are tourist destinations, the study communities were removed from the mainstream activities Most of the households engaged in this study did not have savings either in bank accounts or in the form of shares therefore they were cushioned from the impact on the stock market CONCLUSIONS (2) Decline in remittances, for affected households, led to high levels of food shortage (especially Kilifi), borrowing and reduced expenditure on healthcare, education and clothing Loss of jobs had effects on the households affected in terms of food shortages, limited access to healthcare, education and clothing Access to Government programmes, apart from food relief in Tana River, was also limited 10

11 POLICY IMPLICATIONS Government should invest in poor areas to create employment opportunities and provide alternative coping strategies during shocks The country has an array of poverty mitigation funds through devolved funding, which do not seem to reach the people there is need to refine targeting mechanisms The implementation of the National Social Protection Policy would mitigate the impacts of shocks on the poor and vulnerable THANK YOU 11