VZCZCXYZ0017
RR RUEHWEB

DE RUEHNR #2260/01 3030935
ZNR UUUUU ZZH
R 300935Z OCT 09
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 1427
INFO RUCPDOC/USDOC WASHDC 3241
RUEHRC/USDA FAS WASHDC 1868
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHXR/RWANDA COLLECTIVE
RUEHBS/USEU BRUSSELS

UNCLAS NAIROBI 002260 
 
STATE ALSO FOR AF/E AND AF/EPS 
 
STATE PASS USAID/EA 
 
STATE PASS USITC FOR ALAN TREAT AND PHILIP STONE 
 
TREASURY FOR REBECCA KLEIN 
 
COMMERCE FOR USPTO OFFICE OF ENFORCEMENT 
 
LABOR FOR INTERNATIONAL LABOR AFFAIRS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ELAB ECPS EINV EFIN ETRD ENRG PINR KCOR
SENV, KE 
SUBJECT:  KENYA: OCTOBER ECONOMIC HIGHLIGHTS 
 
REF: A) Nairobi 1423 B) 08 Nairobi 2166 C) Nairobi 373 and previous 
 
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TABLE OF CONTENTS 
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¶1.  IMF FORECASTS CY2009 2.7% ECONOMIC GROWTH 
¶2.  TOURISM SHOWS SIGNS OF RECOVERY 
¶3.  WILDLIFE THREATENED BY DROUGHT AND INCREASED POACHING 
¶4.  CORRUPTION SURFACES AT THE MINISTRY OF EDUCATION 
 
¶1.  IMF FORECASTS CY2009 2.7% ECONOMIC GROWTH 
 
IMF reps briefed donors October 28 on the outcome of their annual 
Article IV Consultations.  The reps said they expect Kenya's economy 
to grow by 2.7% in CY2009.  Given Kenya's 2.9% population rate, per 
capita GDP would decline this year.  Drought and the continuing 
impact of the global slump significantly contributed to Kenya's 
lackluster economic performance, according to the Fund.  The reps 
praised the Central Bank of Kenya's expansionary monetary policy and 
the government's fiscal stimulus (ref a).  They expressed 
disappointment that the government continues to embrace an outdated 
method of calculating the consumer price index, which puts an upward 
bias on measured inflation (ref b), currently 18%.  Looking ahead to 
2010, the IMF reps saw continuing strength in the banking sector and 
a steady recovery in manufacturing and tourism, likely leading to 
over 3% GDP growth; agriculture and global demand remained key 
variables of the strength of future economic growth.  The reps did 
not expect Kenya's economy to return to 6% GDP growth (roughly the 
level before the 2008 post-election violence and global financial 
crisis) until 2013. 
 
¶2.  TOURISM SHOWS SIGNS OF RECOVERY 
 
The Kenyan tourism sector appears to be experiencing a recovery from 
its 2008 decline caused primarily by post-election violence and the 
global economic slowdown.  According to the Kenya Tourism Board 
(KTB), revenues in the tourism sector through August 2009 totaled an 
estimated Ksh 36.64 billion compared to Ksh 33.24 billion for the 
same period in 2008, an improvement of 10.2%.  International 
arrivals during the same period were up 38.6% compared to 2008.  The 
GOK attributes the recovery to increased international marketing, 
including its Internet site www.magicalkenya.com, discounted travel 
packages, and visa fee reductions.  Despite the improvement, 
receipts have not reached the 2007 peak of Ksh 44.63 billion, a 
benchmark year for the sector.  KTB expects that international 
tourism arrivals will close at approximately 930,000 at the end of 
2009, still below the historic 2007 high of 1,048,738 but 
significantly surpassing the 2008 arrival number of 729,000. 
 
¶3.  WILDLIFE THREATENED BY DROUGHT AND INCREASED POACHING 
 
Severe drought and increased poaching have threatened wildlife in 
and around Kenya's protected wildlife areas.  According to the Kenya 
Wildlife Service (KWS), approximately 100 elephants, at least 80 
hippos and large numbers of antelope and other animals have died as 
a result of severe drought this year, the worst in 40 years.  The 
hardest hit areas are the Laikipia, Samburu, Amboseli, and Tsavo 
reserves where animals have had to travel farther to find water and 
competition for pastureland is escalating as pastoralists 
increasingly graze livestock in protected areas.  In Tsavo alone, it 
is estimated that 200,000 livestock have moved into the area, 
displacing wildlife and causing increased erosion. 
 
To mitigate the effects of drought, KWS is supplying hay to certain 
species, especially hippos in Tsavo National Park.  KWS has also 
posted 40 rangers to care for 15 rhinos in Tsavo West.  KWS and 
other wildlife experts agree that the expected increase in rainfall 
from the short-rains season that has just begun will help wildlife 
populations rebound in the long-term, although flooding may increase 
losses of weak and young animals in the short-term.  However, they 
say that long-term strategies (i.e. water harvesting, mitigation of 
human-wildlife conflict through rangeland management) must be 
implemented to prevent further loss as the time between drought 
 
 
cycles appears to be decreasing. 
 
Exacerbating the losses caused by drought, at least 140 elephants 
have been killed for their tusks so far this year, up from 98 in 
¶2008.  KWS links the increase in elephant poaching to Chinese 
laborers working on infrastructure projects and living in camps near 
protected areas.  According to the East Africa Regional Director of 
the International Fund for Animal Welfare, the 2007 CITES decision 
to allow a one-off sale of legal ivory from three Southern African 
countries (ref c) has increased demand for ivory in China, providing 
a ready market for poachers in Kenya.  To combat the increase in 
poaching, KWS has posted surveillance rangers near the camps as well 
as sniffer dogs at Jomo Kenyatta International Airport (JKIA).  KWS 
reports that 90% of ivory smugglers detained at JKIA are Chinese 
nationals. 
 
¶4.  CORRUPTION SURFACES AT THE MINISTRY OF EDUCATION 
 
Two recent corruption scandals have arisen within the Ministry of 
Education (MoE).  In the first scandal, MoE officials 
misappropriated approximately $1.3 million from two programs, the 
Kenyan Education Sector Support Program and the Western Kenya 
Community Driven Development project.  These two programs are funded 
by the World Bank and the UK Department for International 
Development (DfID).  The Ministry of Finance has taken strong 
measures by suspending the programs and 25 MoE officials.  In the 
second scandal, the MoE is alleged to have lost approximately $17.3 
million of textbooks from the Free Education Program over the last 
four years.  Newspapers reported that the textbook losses occurred 
as a result of fraud, theft, and destruction.  The MoE stated that 
the losses occurred as a result of the political violence in 
2007/2008, poor storage, and natural atrophy.  The primary donor, 
DfID, is reviewing the issue but is not expected to pull funding 
from the program.  DfID considers the Free Education Program to be a 
major success and the level of losses to be within reason. 
 
RANNEBERGER