Kenya should diversify its export markets to avoid economic shocks as well as maintain macro-economic stability, an economist says.
Stanbic Bank Regional East Africa Economist Jibran Qureishi told a media briefing in Nairobi on Tuesday that concentration of exports in one region made the country vulnerable.
“Diversification will ensure that exports are maintained even if demand for Kenyan products reduces in a particular region,” Qureishi said.
The bulk of Kenyan exports are unprocessed agricultural products such as tea, coffee, flower and vegetables.
However, most agricultural produce are exported to Europe, the United States and Asia while manufactured goods are sold in Africa.
Government data indicates that approximately 50 percent of Kenyan exports go to the Common Market on Eastern and Southern Africa (COMESA) trading bloc.
Qureishi said that Kenya can diversify exports by developing industries where the country has a competitive advantage.
“The country has arable land as well as a large pool of skilled workers who could help Kenya produce competitive products,” Qureishi added.
He said that given the importance of agricultural exports to the country, the country should make investments that will improve agricultural output.
“The government should invest in irrigation in order to reduce reliance on rain fed agriculture which is vulnerable to variation in rainfall,” he said.
The East African nation relies on oil imports to run the economy. “Therefore the price of oil determines the level of current account balance,” he said.
According to Qureishi, the international price of oil is likely to remain stable in the near future and so Kenya’s balance of payments position will not be impacted significantly. Enditem