The Central Bank of Kenya (CBK) Governor Kamau Thugge has highlighted four factors that are making Kenya lose its competitive edge against Uganda and Tanzania.
Speaking during the December Monetary Policy Committee Media Briefing on Wednesday, Thugge listed declining export receipts, tourism receipts, Foreign Direct Investments (FDI) and the debt burden as some of the reasons.
According to CBK data presented during the briefing Tanzania, in 2022, had the highest export of goods ratio to its Gross domestic product (GDP) at 9.4 per cent
Uganda on the other hand had a ratio of 8.9 per cent. Meanwhile, Kenya had the lowest ratio of 6.5 per cent. Simply put Uganda and Tanzania are edging out Kenya in the export sector.
On the other hand, Uganda and Tanzania have recorded better Direct Foreign Investment numbers than Kenya.
"We reached a peak in 2011 where we attracted foreign direct investments equivalent to 4.8 per cent of GDP. Since that time, there was a decline every year up to the point where in 2022, the ratio declined to 0.7 per cent compared to Tanzania which had twice as much in FDI.
" Uganda had much more at 3.2 per cent," the CBK boss stated.
One of the underlying factors influencing foreign investments in Kenya is the ease of doing business. With high taxation, foreigners look for areas where taxation policies are much better.
Concerning tourism, Tanzania had the highest ratio at 2.8 per cent with Uganda coming in second at 1.6 per cent.
Kenya only registered a ratio of 0.8 per cent in 2022 despite an increase of 0.2 from 2021.
"At the same time, our debt service has also been increasing and it is much higher than our neighbouring countries. The combination of these four factors has led to the weakening of the Kenyan shilling," he added.
According to the data, Kenya had the highest external debt service ratio to the GDP at 3 per cent followed by Uganda at 2.3 per cent Tanzania's ratio was pegged at 1.6 per cent.
However, one key areas that Kenya was still dominating was in diaspora remittances having recorded better numbers than Uganda and Tanzania combined. Tanzania recorded the lowest remittances from the diaspora.
