Nairobi: Kenyan political unrest threatens to reverse its economic gains and further rattle regional economies that depend on the country’s status as a regional hub, the World Bank warned on Thursday.
The bank said other major lenders and western democracies including Canada, Denmark, France, Norway, Sweden and the United States had voiced similar concerns as more violence rocked the capital Nairobi.
Kenya serves as a transit point for landlocked and fragile economies in Uganda, Rwanda, Burundi and eastern Democratic Republic of Congo, all struggling to recover from civil conflicts.
The United Nations has peacekeeping missions in the region, also home to a huge reservoir of natural resources.
Recent economic gains and growth momentum will be impacted
“They are concerned that the unrest that continues in some parts of the country threatens impressive recent gains in economic growth and poverty reduction,” the bank said in a statement.
“Hence, the regional impact of the situation in Kenya could be significant,” the statement explained. Uganda has reported a biting fuel crisis while the UN says its operations in central African nations are in crisis.
The bank, which helped the country achieve a December growth rate of 7%, warned that the violence threatens to undo the gains.
“At stake is the pre-election Gross Domestic Product growth rate of 7%, rising business confidence, increasing tourism, measurable progress in firm level productivity, significant gains in democratic development, and the lifting of over two million Kenyans out of poverty over the last few years,” it warned.
“The current situation may have had some negative impact already,” the statement said. Kenyan traders estimate that they lose about $29 million per day owing to disrupted businesses, stalled transport as well as the suspension of daily tea auctions.
Stock exchange shut down
The violence forced the Nairobi Stock Exchange to shut on Thursday, the second day of trading since Christmas eve. $586 million or about 5% of market capitalization was wiped off the value of shares when trading resumed Wednesday.
“In consultation with the traders and the chairman of the board, we took a decision to stop trading because not much trading is going on. So we’ve actually concluded the session,” its chief Chris Mwebesa told reporters.
Violence has left more than 300 people dead in the wake of President Mwai Kibaki’s re-election in December 27 elections, disputed by challenger Raila Odinga.
Odinga, himself a wealthy businessman, has insisted that Kibaki must concede defeat before any meaningful dialogue, while the government has refused outside mediation.
The dispute has sparked riots which were fiercely repressed by police and a cycle of tribal killings in Nairobi slums and opposition bastions in western Kenya, bringing east Africa’s largest economy to a screeching halt.
The bank urged the two leaders to launch dialogue and end the clashes. “We urge that all actions be considered and conducted in a manner that does not disrupt the functioning of the economy, the movement of goods and services to neighboring countries, or the delicate task of building trust across all political, social and ethnic groups,” the statement explained.