VVWITH1 eport o. EA- 118

SONF vjzK]

This report was prepared for use within the Bank. It may not be publishednor may it be quoted as representing the Bank's views. The Bank accepts no

responsibility for the accuracy or completeness of the contents of the report.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

CURRENT ECONOMIC POSITION AND PROSPECTS

OF KENYA

August 7, 1961

Department of Operations

Europe, Africa and Australasia

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CURRENCY EQUIVALENTS

.b 1 million = U. S. $2. 8 million2n T.A s i = = .TT S $2 8

100 EA cents = 1 EA shilling = U. S. 14 centsu. S. $1 = 7. 14 EA shillings = 714 EA cents

U. S. $1 million = L- 357, 143

TABLE OF CONTENTS

Basic Statistics

Maps

Charts

Summary

I. Introduction.............................. 1

II. Internal Developments.......................... ..... 2

Population............................................... 2National Accounts ........................................ 2Agriculture.............................................. 2Manufacturing Industries and -lining.........................Basic Services.......................................... *Credit Policy, Banking, Prices...........................Public Finance.................. 0 ............ 5

III. External Developments..................................... 7

External Trade and Payments............................... 7

IV. Race Relations .......... *..........i..................9......... 9

V. Creditworthiness and Conclusions............. ......... 13

Lonv-Tenn Prosnpects for Exnanding Currentand Capital Receipts................ ............. 13

Fxt.rrnnl nhth..q qnrl (n~n-nusins .----------------------- T

Stati sticanonpediv

KENYA

Basic Statistics

Area: 225,000 square miles

Population (mid 1960 estimate): 6,551.000

of which:African 96%Asian. etc. 3%European 1%

Average annual growth: 1.6%

Gross Domestic Product (1960): I223 million (including subsistence economy)of92 million whicv:lent

Agriculture LO%

b) non-African (16%)

Service industries 33%

Manufacturing 10%

Per capita Gross Domestic Product: 1234

-,-ernal trade:

Total Domestic Exports: Total Net Imports:IYOU 1)3.2 million 1960 iU.1 million

of which: of which:Coffee 29% Manufactured goods 31%Tea 1370 Machinery and TransportSisal 13% Equipment 30%Wattle Extract 270 Mineral Fuel, LubricantsHides & Skins 5% and Related Materials 11%Sodium Carbonate 4% Other 28%Other 3h% 777

100%

Sterling Assets A million External Debt 1 Million(Estimated as of Dec. 31 1960 42

June 30, 1960 36 (Net of Sinking Funds) ($118 milliorlof which: equivalent)Government (11)Currency Board (Kenya share) (16)P.0. Savings Bank ( 7)Commercial banks (-7)Kenya companies ( 9)

KENYA

ELEVATIONS AND RAINFALL

C U D AN 0 20 40 60 8C O0 Mfes

ETH l U P l ALoktaun •

RUDOLF i

SOMALIA

UGANDAW0jir

aorssa

ELEVATIONS IN FEET

Sea level-2000

S21100-5000TOPA~SDN\<

.ncn r ... .......ms REEONIC .c.n. THE

--- EC FREEV[CNGO KENY30 INCHES OF RAIN ENYA

Good MOMBASA

Fa ir ••••••" •Territorial boundaries---------- Provincial boundaries A A AN

DCMoor 9BD-

DECEMBER 1960 I BRD-6 72 R

KENYA

ECONOMIC RESOURCES

TURKANA "UV ); F Marsabil

NORTHERN FRO NTIER

Mt Elgon

RET

Wý ý hn tIS.KsnyoL AKE

NoroN

Suga r yi

ot wte DESERT

F Dairy products, Pyrethrurm Kili,,0 ro0%%

.Beef F e m

Afrcan cattle Teag

SUDAN ETHIOPA

'"7 -.---.-..-.--.. Rair-ad

(IC KENYA ... AS

40 coe 40 80 120

byAPRI m96 .3R 6 3APRIL l961 I3RD-673 RI

KENYAGROSS DOMESTIC PRODUCT AND GROSS CAPITAL FORMATION(MILLIONS OF £ AT FACTOR COST)

2501 250GROSS DOMESTIC

200 PRODUCT

AND MISC.A150 - 5 0

GOVERNMENT I.10O0-- -- -- l UU

MANUFACTURING

501 POWER 50AGRICULTURE I1 PR VATE

" ^ '^ *L''' VT

1954 1955 1956 1957 1958 1959 1960(Prelim.)

VOLUME OF EXPORTS FOR MAJOR COMMODlITIFS(INDEX, 1950= OO)

PYRE THRUM ...

60- 0

400 - - - -.- 400..'- . COFFEE

200 -.-- 200

10 1 o o0100 t ------ -I -- 00

'38 '46 '50 '53 '55 '56 '57 '58 '59 '60

DOMESTIC EXPORT AND IMPORT PRICES AND TERMS OF TRADE(INDEX, 1954= 00)

17 5 r -- , -75

15 0- 150

TERMS OF TRADE

45,,,-IMPORT PRICE

00 -........... 100

N DOMESTIC EXPORT PRICE

5 01--- 1 1 50'48 '50 '52 '54 '55 '56 '57 '58 '59 '60

5/12/61 IBRD-Economic Stoff1877

KENYATOTAL GOVERNMENT RECEIPTS AND EXPENDITURES(MILLIONS OF £)

0 [0 20 30 40 50 6<01 1 1

1 ~ EXTERNALTAXATION AND OTHER GRANTS LOANS

RECE5 PT

EXPENDITURES

l20 /ýj f i r EXPENDITURE v-ur V emeMC I r frrKu U rV1

RECEIPTSEXPENDITURES

REFEPTIC

EXPENDITURES

1958/59R ECE IPT S

EXPENDITURES

1959/60EXPENDITURES F

RECEIPTSEXPENDITURES

1960/61 (Est.) ~fff.NlNl' ,

REGEl PTS5

yxx>K< 1 xxxxxxOC:;:>

AN OFUnP n X YTPNAI AND NTERPTERPPITnPIAL TPAn

(MILLIONS OF £)

NNE T IMPORTS

60 -

40 Un

EXPORTS TO COUNTRIESI ATnuro Tu^AAru in^ ^hAin

2 0 ¢ HE'I I N 1 1" " 2TRADE BALANCE WITH TANGANYIKA- 20

UGANDA AND TANGANYIKA

OJ'38 '46 '50 '53 '55 '56 '57 '58 '59 '60

5/12/61 lBRD - Economic Stoff1878

KENYASERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT(MILLIONS OF DOLLARS)

40 17--i rT i r--ri40

15 1 -1353- - -35

KENYA'S OWN DEBT PLUS DEBT25 - - -- INCURRED FOR RAILWAYS PLUS 25

CONTINGENT DE1T SHARED WITHUGANDA AND TANGANYIKA

I 5H 1 L15KENYA'S OWN DEBT PLUS

DEBT INCURRED FOR RAILWAYSIlllk

5 5

'46 '50 '53 '55 '60 '65 70 '73-ACTUAL - PROJECTED -

WORLD PRICES OF MAJOR EXPORT COMMODITIES(DOLLARS PER 100 L035.11 (1 PER TN)rl

100 1 250

COFFEE*•K- LEFT SCALE)

80 ··. l l - 200

F eb.foulN ~%__ _ _ 150

40 ""--1 "•""1i ni

20 50TEA** SISALT

<«- LEFT SCALE) (RIGHT SCALE · +)

§90 19 51 192 4953 4 1955 15 1957 1958 1959 1960 1961

* Coornb1,.Mdellin in New York (15-) olombicrNs, MAnie A Meelon(r6-ad I96),jofJ 1 /ltJ lT ý~ U II . ~vV 1 tj 1 .J t J.l UVtI UIJk,1.1 N,II~ ~aniaie and Mede~kllk ( 16 andfl kk .. 0.11f

** U. K., annual averoge prices at London auctions for East African tea (1951, 1960, and 1961) orKenya teo (I952-59).*

t East Africa No.1, c.i.f. European ports.

5/12/61 IBRD-Economic Stoff1879

SUMMARY

1. This report covers developments in the economy and race relationsover the last year or so and reviews the overall creditworthiness posi-tion and prospects.

2. At the constitutional conference, held in London early in 1960,agreement was reached by representatives of major racial communities inKenya and of the United Kingdom on proposals to amend the Kenya constitu-tion to provide for greater African participation in Government. Generalelections were held last February under the amended constitution and anew election law and Africans have acquired a majority in the legislature.Although no dtp is sPt by the Uni +-H Kingiom for Knva to achieve inri-pendence, an African-controlled self-government may be achieved withinth? uen fr m 1nihcz,nd fnll indnndn- an or two va h t

3I Thep i v1 +r +Jin+~ nn Africn-oentronlledl goivnmevnt wounildl ln:ch

far-reaching economic, political and social reforms which would adversely

dence in the non-African sector. The most directly affected are some

pean settlers have had exclusive farming rights. African political leadersnave not accepted exclusive use by Europeans of the Highlands and have sofar not given unequivocal assurances about the security of European landuties there. in the circumstances, in i60 many European farmers andsome European and Asian businessmen began reducing their investments inKenya and remitted their disposable funds abroad at an average rate ofaround Ll million per month. During the first three quarters of 1960 theoutflow of private funds was exceeded by the commercial bankst drawingson their balances held abroad. Having largely exhausted their loanablefunds, the commercial banks later restricted credit and raised theirinterest rates.

4. It appears that the growth in Kenya's gross domestic product in1960 barely matched the population increase of some 1.6%. The Govern-ment's financial position has deteriorated owing to the difficulty ofborrowing on the local market and a decline in receipts from taxation,and the Government relies on the United Kingdom for its development ex-penditure. Service on public debt amounts to about 9% of total govern-mental revenue.

5. Despite a significant growth in African sector under the Swynnertonplan, European and Asian sectors in the Kenya economy together still ac-count for more than two-thirds of the gross domestic oroduct. some 80O ofthe exports, and almost all manufacturing and service industries and tech-nical and managerial skills. Unless confidence is restored, there semslittle likelihood of an enduring improvement in the non-African sector ofthe economy. If the interracial tnsions and lack of condn pr--1.disinvestment in European farms or, more seriously, lead to a mass exodusof Euronean and Asian a nnital and kynw-w ou of he cu _ ipcof such dep n on th ecoo wouldl"y be sei upactof such developments on the economy would be serious.

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6. To encourage further development of African agriculture and tohelp to alleviate the tensions between Africans and Europeans arisingfrom land ownership in the "White Highlands", the Government is now takingsteps to open the exclusive European area to Africans and to assist newAfrican settlers through Government-supported resettlement schemes. Thesemeasures may Pradually eliminate a major source of African discontent andhelp towards restoring confidence in the vitally important European farm-ine sector.

7. If nolitical stability is assured and both the immierant communi-ties' and foreign investors' confidence in Kenyats political future isrestored. there are reasonably good orosoects for the economy to resumeits growth at a mcderate rate, say, at about 3-4/% per year, leaving areal net innreas of about 1.q-21 per year in the ner canita income.

9- Over t.he- last yeanr plit.icPnl r1iffPrPne-.P. het.un variouis rcacomrmunities and political groups have probably become more prominent andtribal nntnanism and rivalries may in fii+.iirP Pyp.rth. thnmrie m q.rn-

ly in Kenya's political life. There are highly emotional political issues,

not end soon.

9. An important question is how the present close economic ties amongIjl _LU.L 11 ;; V X".I± -dI U± uL .L L E33 Ccu D.L U " I 1U .Lii"L wlui.~1 ulloy 1"UL~v= Lli

dependence. What will happen after independence cannot be foreseen. ALXUC.Loe association1, perhaps 4 J feudratin -b 11VL J.111IjJUZjOLU_U-,* _11 4;LL Uiutit

uncertainties the guarantee of the United Kingdom of the proposed Bankloan to Kenya provdues an important reassurance.

CURRENT ECONOMIC FOSITION AND PROSPECTSOF KENYA

I - IITRODUCTION

1. A general appraisal of Kenya's economic position and prospects wasmade last year by a Bank mission which visited the country in connectionwith the loan for African Agricultural project. The Economic Report (EA-109a, May 17, 1960) referred to the political uncertainties and the needfor the guarantee of the United Kingdom of any Bank lending.

2. Over the last year or so important changes have taken place in

Kenya's political and economic life. As was mentioned in the earlier re-port, at a constitutional conference (the Lancaster House Conference) con-cluded in London in February 1960, agreement was reached by representati-ves of major racial communities in Kenya and of the United Kingdom on pro-posals to amend. the present constitution. Under the policies accepted atthe Conference, the African majority will before long obtain political2ontrol of the country. The ossibility that an African-dominated Govern-ment would launch far-reaching political, economic and social reforms andmight hamner the immigrant communities' economic interests has caused deep2oncern and a serious loss of confidence among Europeans and Asians. Since%h T,nc.tr Hon nnfPrPnnP frPnnPnt nublic statements made by African,iationalist leaders, criticising particularly the present European landennre in Keny, have knt the immigrant. communitin.' ftars alivp. TheEuropeans' concern was heightened during the Congo crisis in July, 1960.

3. While cew Europeans and Asians have left the country, the greatmajority take a "wait and see" attitude and would prefer to stay in Kenyaprovided that their property rights and legitimate economic interests willbe respected. The most directly affected are some 3,400 European farmingCamilies in the "White Highlands"1 , where the Europeans have had exclusiveCarming rights. A fairly large number of these would probably wish toleave the country now if they had an opportunity of liquidating their pro-perties without serious loss. There is, however, little active demand atpresent for farm property and few farmers are prepared to sell their hold-ings at a sacrifice. There are also a fairly small group of farmers whowould stay in all probability and are now expanding their holdings.

No date is set by the United Kingdom for Kenya to achieve independ-ence, although some African political leaders expect that this date wouldnot be later than 1962. It would probably be a reasonable working assump-tion that an African-controlled self-government would be achieved within,the next few months and full independence by one or two years thereafter.

5. This report presents a summary of important developments in Kenya'seconomy and interracial relationships over the last year, with a review ofthe overall creditworhiness position and prospects.

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II - INTERNAL DEVELOPMEN1TS

Population (Table 3)

6. The overall rate of population growth remains at about 1.6% peryear, representing mainly the rate of growth of the African populationwhich accounts for about 96% of the total. Because of a steady declinein immigration, mainly due to a deterioration in the political climateand reduced economic activity, the rate of increase of European popula-tion from 1958 onwards has been about 2-3% per year as compared with moret.han twice aqq mucph bhPeore t.hat. dat. The rateP o)f arnt.~h nf thep Aqinpopulation, which is supported mainly by natural increase, has been some-

natinal Accou-nii nt (_zTab'le r-,q

7w Pr n JmA V,vi r c! +, J nn+ zf i- +. h a nrr, nii nf +. Q r Q6 m- rl4,

that the real growth in Kenya's gross domestic product in 1960 barelymatched the population increas of some I.6q- A~ areslt o%f'+I th lc

of confidence in the European sector, private investment in agriculturean U -; -1. A 4 ngs~.L ha d c ln d. T11 I I I SV -- 4 4I~i - 'II 04-2JJ -V~ -J0 J -A

but because of lack of finance, the Government is now scaling down its

JLgLLcultue k±aulfe (-UJ

8. Vver the last year, some impressive progress has been made in agr-culture, particularly in the African sector. In the Central Province,despite an exceptionally severe drought, the execution of the Swynnertonplan which was supported by a recent Bank loan has proceeded satisfactori.-ly and many African farmers have reached or are about to reach a stagewhere they can start drawing satisfactory cash incomes from their newlydeveloped coffee or tea holdings or pyrethrum, maize and dairy farms. Inthe European sector, too, the production of crops was in general higherthan in the previous year. Although major export products, includingcoffee, tea, pyrethrum and sisal, still remain essentially "European crops",as a result of the execution of the Swynnerton plan and other governmentprograms, more and more small African farmers are participating in theproduction of the export crops. Cattle, coffee, maize and cotton still re-main, in the same order of importance, the principal sources of Africancash income. In 1960, expansion in the African acreage was mainly fortobacco, coffee, pyrethrum, tea, cashew nuts and rice (Table 8) and thesemay attain importance in the future.

10. To encourage further development of agriculture and to eliminatea major source of African discontent, the Government is taking steps toopen up the "White Highlands" to African occupation and to assist the newsettlers in this area by Government-supported Resettlement Schemes. Thisprogram, which should in the long-run increase Kenya's gross domesticproduct and aricultural exports and help to widen the Africans'

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nprticipation in +-he cash Pronomy is being considered for Bank lendingand is described in detail in a separate technical report.

11. European farming still constitutes the backbone of Kenya's cash-uj 'a .1 _ _ he je tb___s~yy+n.cd-t.v i ~n ,ff~i

from a serious lack of confidence as a result of which many Europeanfarer hLaveJ sus aunt AVll reduced or stpe Uhei .. *rstm f-a-11

property. Operations of many farms have been geared to generate the

hedge against possible disorder or "land reform" by a future Africanouvernment. Altiough many African leaders have expressed tUeir Upiuon

in favor of maintaining European farming in Kenya, so far few have givenunequivocal assurances that the present European land titles in tne "Wnite

Highlands" will not be violated. Some African politicians claim that the"White Highlands" were taken forcibly from previous African owners andshould be returned to them without any compensation. The Government'sResettlement Schemes to which reference was made in the previous paragrapnare designed partly to alleviate the Political concern with land as aninterracial grievance and thus to help to restore confidence in the vital-ly important European farming sector. Although production of crops inthe European areas continues to expand unhampered, the present lack of

adequate investment or even proper upkeep in many European farms may, ifprolonged, affect the amount and quality of production in future.

12. Partly because of favorable weather, production of coffee in 1960/61 was estimated to exceed by more than one-third the previous year's crcp.But because of lower export prices little increase is likely in the exportproceeds. There are indications that the quality of the crop has slightlydeteriorated, partly because of the bumper crop and partly due to relativeinexperience of some new African growers who now account for about a halfof the total coffee acreage. The Agriculture Department and the producers'associations have been enforcing strict controls and will not allow anyappreciable decline in quality. The expansion of the acreage under coffeecontinues mainly in the African sector, but the rate of increase is likelyto level off by the mid-'sixties. Preliminary estimates indicate thatin 1960/61 the production of pyrethrum increased by nearly three-fourths.Unlike the price of coffee, the price for pyrethrum remained stable andthe increase in production should have been reflected in higher exnort,earnings. Because of the lesser time required for fruition and lowerdevelooment costs, the Government is enconraina q lare exnansinn inAfrican pyrethrum growing which at present accounts for about one-eighthof the tot,l nutnut. Tt Pnner. +.hn+. inrPnq of ro ndinrl hn h

achieved in 1960/61 in the production of both tea and sisal. Tea stillremains q nrdominantly Euronann crnn with an African shae of about 6%But the African production should be larger after the mid-tsixties. A newAfrican Rmallholder To Schame, spnno+Ad hv the+n1anln neviopme-+

Corporation to the extent of about ml million, is now being executed andshouA ca ntbteionwrkeshave te eanlsucceal toucin 1 960

Over U~ d. -Uh las year e.Iors ' 1 - A L p_- I "o JU.iL I eadu'ZI 0 UU UL l LL

African plantation work ers have been fairly successful. Late in 1960African labo in Vuopa te esae -tQc agis th 4urpea tea,__4_.

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companies ana obtainea some raise i- wage, ruy as a resuu U_ ethe tea companies have slowed down their investment in 1960-1961.

Manufacturing industries and Mining (Tables 7-8)

14. Indications are that in 1960, activity in manufacturing industries

and trading remained static as a result of Lower private investment and

lesser consumer spending in the European sector. The construction of a

large oil refinery in Mombasa by the B/nell group is proceeding as plan-ned. Establishment of a rayon products plant is under consideration.There have been reports of African unemployment in large urban centers

where the bulk of the country's manufacturing plant is located. Since therailway strike of 1959, no major labor dispute has developed and industriallabor relations remain reasonably satisfactory in the manufacturing field.

15. There have been no significant changes in the mining sector overthe last year. Exploration for oil continues by three companies (BP/Shell,Frobisher Ltd. and Mehta Oil Compary) in the coastal areas and the Somaliaborder. No find has so far been reported.

Basic Services (Table 10)

16. Despite the slowdown of economic activity, the growth of demandfor electric power continues at a rate of over 10% oer year. Presentsupply is adequate. To meet future demand for power in the Nairobi area,the East African Power and Lighting Co. Ltd. intends to develop the hydro-electric potential at Seven Forks on the Tana River. Discussions wereheld with the Uganda Electricity Board, with which the East African Powerand Lighting Co. Ltd. has a long-term bulk supply contract, to reachagreemont on ;iving nre7dene to the Seven Forks scheme over UgandarsBujagali project on the Nile. If an agreement is reached with Uganda onthis matter nd annate finance will be avilable thp rn-t.rnion of

the Seven Forks scheme may start in 1961 or soon thereafter.

17. Kenya's railways system, operated by the East African Railways

port and still has a margin for any likely increase in traffic in the im-Meiantepfitu.ip Prnoress hasq heen maderb ovrtels erin inbiue '

trunk roads under a T,4 million contractor-financed program and in the

under the Bank's recent loan for the development of African agriculture.

Credit Policy, Banking, Prices (Tables 11-16)

18. Since 1957, the British East African territories of Kenya, Ugandaan TaGanI, whichtshre the ie uIrenIcy anu anKing system, nave hadonly a relatively small increase in their total export proceeds, partlyUue o ower export prices, and to cope with a moderate capital flight. Toa large extent the capital flight was compensated by an inflow of officialand private foreign capital and by some decline in sterling assets. As aresult, the money supply in East Africa, consisting of notes and coins incirculation plus demand deposits, declined by about L2 million by mid-1960,

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19. After the Lancaster House Conference, many European farmers andsome European and Asian businessmen in Kenya started remitting abroad(mainly to London) their disposable funds at an average rate of probablyL1 million per month. The pace of this reached its highest point duringthe Congo crisis in July last and there is as yet no sign of its coming toan end. During the first three quarters of 1960, commercial banks in Kenyaincreased their loans and advances substantially while their deposits de-clined, indicating the likelihood of some relationship between the moneydrawn from the banks and the rate of capital flight. It appears that theoutflow of private funds was more than balanced by the commercial bank'sdrawings on their balances abroad, including mainly the London balances,which were overdrawn by about L5 million at the end of last September.

20. Having largely exhausted their loanable funds and reduced theiroverall liquidity ratio from about 30% in June 1959 to nil in September1960, the commercial banks restricted credit and raised their interestrates. Their prime rate now stands at 8%; the interest payable on de-posits has also been raised to attract local savings deposits. By the endof the year, the bank loans outstanding declined by about L2 million, whilethe deposits increased twice as much.

21. The Eurooean cost of living index in Nairobi remained stable inboth 1959 and 1960. Minimum wages for Africans have been raised.

Public Finance (Tables 17-22)

22. In the fiscal year 1959/60 the Government was able to maintain itsplnnerate o)f bothcr-rent. nnr onni +ml oYnPncli tuirp 1hrw-rwa i n mrr1tion to its revenue from taxation and other resources, on United Kingdom

ano'1-no , A P T) R. L,T --ro+ -r Ii,r - -en *nAre ' n 1 -^r,+ ^-P- - .Lj- ~t a nd -'~ % . - - Wo~~X V rC_ _ nd bj 4in- ning a m.lIa4 OU-_1- --

additional floating debt. Revenue collection in 1959/60 was not affected1ir +in. rate,o,- oSf l'k- r CACk, ~ ,+ 4-1 o +- ;-n1O{/1 4n

CL .-L, LA--.4 L* 0 - -- - v-L V-*UJ . - VC± ,LJUS 1 Lt

below the original estimates. For the 1961/62 fiscal year the Government11LCLZ3 Lllul ZCtDZU UC"daULV11i UV 'Y± j-U i1dUU-L U-LUJI. L I_t:Vt;LUt; LJL 4AUVUU~ MC i1L.L_.LUL1*

231 P ince- 16 Kenya has been unable to raise 'loans in the Londonmarket and the present yield to maturity of Kenya bonds in London is around

P~ ~ pae w~ Cn, -V. '7 )4 V..-l,1( TT-I,-14- 41PC;. cO o,umj - a u-. L' 1 (4,U &J in .AM rc 10160. 4 .r U41 u 141 UUO

very little (about 10.h million) was raised in 1960/61 in the local market.IluJ Sul-st-anLCI-.L ma'dLYI-eu L)V .UV_ _ 1.11 Idle L near4fUtu( in.~ 1 1 L

Nairobi or in London, the overall deficit of the current development planouvernUg the tree-yearU periou ennUg Uune 30, 173 wl-l amount to aboutI7 million (Table 22). To fill this gap and also the gap developed in thecurrent account, the Guvernmient expects to oualn very substantial additionalloans and grants from the United Kingdom and is approaching international ananational lending instLtutions abroad for their assistance. he proposedAfrican Resettlement Scheme and an expanded program for African training arenot included in the development plan and the Government is seeking financefor these separately.

24. Unless confidence is restored fairly soon, it seems that Kenya willhave to rely more heavily than in the past on external assistance,especially

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loans ana grants Irom tne Uatea- Kinguom, to execuUe is uteVvLomiU pI'rUj-ects. The United Kingdom Government has already indicated its willingnessto orovide substantial assistance during the current development planperiod in the forms of Exchequer loans and the C.D. & W. grants (Table 22)and funds additional to these may be forthcoming from that source. TheColonial Development Corporation,in addition to its contribution to theAfrican Smallholder Tea Scheme,will provide assistance in financing theAfrican Resettlement Scheme. Furthermore, the United Kingdom Governmenthas already assumed responsibility for the East African territories' de-fence expenditures (amounting to about l million in the case of Kenya)and for the "expatriate element" in the European civil servants' pay (about12 million in the case of Kenya). These should provide substantial relief.To add to the Government's current expenditure, however, there is a generalsalary increase for all government workers and, if the recommendations ofa special commission (the Raisman Commission) which has made a study of thefinancial arrangements for the British East African territories' sharinga common market were accepted, Kenya might lose to Uganda and Tanganyikataxation revenue amounting to about LO.68 million a year.

25. Considering these and other similar factors, the chances are that,although a higher rate of governental spending during the present dif-ficult times would seem highly desirable, limits of finance will slow downthe execution of some development projects. The Government has recentlyannounced its plans for making some cuts in expenditure under its currentdevelopment plan. In doing this, higher priority will be given to moredirectly productive expenditure, such as the programs under way for Afri-can agricultural development.

26. Service on public debt, which has increased somewhat over the lastftw years. amounts to abnt. 9% nf total cmvernmPnt.al revn1i. Pyr-lnviinc

external loans and grants.

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III - EXTERNAL DEVELOPMEINTS

External Trade and Payments (Tables 24-28)

27. Imports during the first half of 1960 exceeded imports in the firsthalf of 1959 by over 65 million or about 20%. This was mainly due to in-creased imports of consumers' goods, motor vehicles and some investmentgoods, which were ordered by traders late in 1959, before the LancasterHouse Conference. Because of the slump in retail trade which appearedearly in 1960 and the subsequent credit squeeze, sales have declined andthe increased imports should have largely been added to inventories. Therate of imports declined during the second half of 1960 and the overallincrease in imports in 1960 over 1959 was reduced to about 14%. It isprobable that there may be a modest recovery due to restocking in 1961, butit is unlikely that the high levels of imports in early 1960 will be reached.

28. Domestic exports in the first half of 1960 increased only moderate-ly (about 37). The slow rate of growth was due mainly to lower shipmentsof coffee and the lower prices obtained. These were more than made up byincreased sales proceeds of tea, sisal, pyrethrum and some lesser exports.During the second half of 1960, the export proceeds were substantiallylarger than in the corresponding period of 1959 and the total exports for1960 exceeded the 1959 fip-ure by about 6%. The trade gap in 1960,. however,was wider than in 1959, partly due to a surge in imports early in 1960 andpartly because of lower export prices for coffee. The substantial increasein production of major export crops in 1960/61 should be reflected mainlyin the export proceeds during 1961. so that the trade balann in 1961 mayshow a smaller deficit than in 1960.

29. The balance of payments estimates for the British East African

for 1958 which were made by the East African Statistical Department areshown in Table '24b of th,e Stati;sti-calI Annex. The_ curn-con eiiin 198 was about 18 million, as compared with some *28.5 million in 1956nnrl1Ji Tri 'Ii r%n-n, IO~ aK nd wa fiTn~n lagl by privat 'al - " owand public loans and grants. It appears that in 1959 the inflow of both

I. a d-l - '>. L 0 wiall JLII -L,7-)u adU ll l tl 2az5i~ u ricanterritories as a whole had probably a smaller current account deficit than

A. ouduLn ou the preisminary balance 0f payments estimates (Table26-a) in 1958 Kenya had a current account deficit of about L38 millionwh ic, anlthugh sma.ler than te b53 million deficit in the previous year,still exceeds the total export earninrrs in 1958. There are, however, someimpotan qlua1liiations which should be made.

S 1A -I- I- .

L. its was descrioea in detail in the previous economic report (para.72-79, Report To. EA-109-a, dated May 17, 1960), it is difficult to

isolate U e-a's external trade and balance of payments from those of theother British East African territories with which it shares the samecurrency, joint financial institutions, and a common customs frontier,

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peLiu ng~II w-± IL L 4 d: . tL X0V1LLL 1. tlz .L LUV UJ. .j " C.±LtL 1LJ1_

Many transactions between Kenya and other East African territories are notrecorded an ianyIdI~ igoods Jimport~ed int-u i.:II ii DILLULJ,jLiU_LY LO -U _L11VrIk

and Tanganyika are not identified as such. Recorded imports into Kenyawhicn in both 7Y_) ana yp were almost twice as Large as tne total u1Uetic exports may, therefore, be overstated by a substantial margin.

32. There remains, however, a genuine and probably fairly substantialtrade deficit which should have been met in part by the inflow of privateand public capital from sources outside East Africa, but largely from un-recorded payments from Uganda and Tanganyika for various facilities andservices (railways, ports, middlemen's profits and investment). Until1960, there was a substantial inflow of capital from other East Africanterritories into Kenya (mainly consisting of Asian funds remitted toNairobi from Uganda for investment in real estate).

33. The large deficit in Kenya's balance of payments in 1958 wasprobably covered, therefore, by drawing on the neighboring territories'earnings in foreign exchange. It is likely that in both 1959 and 1960Kenya had a somewhat smaller current account deficit than in 1958 which,considering the recent decline in the rate of inflow of private capital,may have been financed mainly from Uganda and Tanganyika's balance of pay-ments surplus, inflow of public capital and a drain in the commercialbanks' sterling assets.

34. The approximate value of Kenya's sterling assets, as held atJune 30, 1960 by central government, local authorities, statutory boards,Post Office Savings Bank, commercial banks, trading companies and theEast African Currency Board (Kenya's share) amounted to about 536 millionwhich is equivalent to over a half of the Colony's yearly import bill.Although up-to-date information is lacking on the sterling assets, it islikely that these have declined somewhat in the course of 1960 and 1961.

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IV - RACE RELATIONS

35. Under an amended Constitution which is an outcome of the settle-ment reached at the Lancaster House Conference, the Kenya LegislativeCouncil now has seats for 65 elected members, including $3 directly electedby the communities concerned on a common roll and 12 (4 African, 4 European,3 Asian and 1 Arab) elected by the directly elected members themselves.Twenty of the $3 common roll seats are reserved for non-Africans (10 Euro-pean, 8 Asian and 2 Arab) the candidates for which are chosen by a systemof primary elections within the communities concerned. The Governor re-tains the right to nominate additional members to ensure a governmentmajority. The franchise for all "common roll" seats is greatly liberal-ized. oroviding for a aualitative franchise with a multiple vote forAfricans, universal adult suffrage for Europeans and Asians and universalmale suffrage for Arabs. The Council of Ministers consists of 12 Ministers,of whom 8 are "unofficials" (4 African, 3 European and 1 Asian). The Gov-ernor scltnt.s the ministers at his discretion.

,I, The amended Cntitntion rPnrPents q new stage in Kenva's consti-tutional development towards greater participation of non-officials inthe Couint.-ry'snnIJ .pol i affnirsq nd, monnre signmificanntly,- grnwj nrr A frica!ninfluence in the political field. The general elections which were heldat the end of Februanyr 1961 haveresle inan AfrYican)-dorinatedP Legrisq-lature and may eventually lead to African-controlled self-government.

37. Since the Lancaster House Conference some significant changes havetakent pl nC ± .t1- rm-Cl riella tJo S -1%d i-I' hle polltcl ali nile ts VJitnin.~ t-1ee

major racial communities, including Africans, Europeans and Asians. At

rapid progress towards an African majority in Government and political in-Llep 1ende uce. lilt= lluivl) -110, Ull WD-_ ulit: 4 i IIIA.~, W i- 1 J.L.U -1IUV UlVD%-_ VUV

were prepared to live with the approaching African domination of the poli-tical scene the nLundelL group) anu uj auvucating restaance to theshift of power to the Africans (the Briggs group). The latter is theoly mauor group wichuh nanot endorsed the beUtemenU reauueu au UteConference.

38. Since the Conference, both the Briggs and the Blundell groupsseem to have lost some ground and a third group has emerged. After GroupCaptain Briggs' death in 1960, his "United Party" has been experiencingdifficulty in maintaining effective leadership and its standing at theelections was poor. Mr. Blundell's efforts to organize his "New KenyaParty" as a multiracial political organization has failed,and may havebeen premature. A large body of European settlers now seems to be sup-porting Sir Ferdinand Cavendish-Bentinck's new "Convention Movement" whichadvocates relying upon the European community's economic power as a balanc-ing factor against the Africans' growing political influence. It hopes toobtain from the United Kingdom a guarantee of European land titles andvalues. On the European side the elections were fought mainly between th.N"Convention Movement" and the "New Kenya Party". The former obtained larcersupport from the Europeans at the primary elections, which was partly offset

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Inter br the &fri(-'n vote going to the latter at the general elections.At the end, the "New Kenya Party" obtained a margin over the "Convention".

39, The Asians, although split into several religious communitiesand s+ill tern. h+irn +.he nlicies nf continnira c-nnnertion with theEuropeans and of a realistic compromise with the Africans, have sincemoved in the general d1i-rectiojn of gfivingr cmpnnnr. +.r the1P Afrinn~n nnii.;P.Both the "Indian Congress" and the new "Freedom Party" support some prin-^ile lan ' id doAnI. byi the A fricn mi naina ist. Rnnincr r1mnic f-rnm theAfrican Nationalists for an absorption of the coastal "Protectorate" by+I,- V - , 0-1 -r +I, A , I, c o+i1 I ol ir nn +hn (.ln i l nI vo fny, +h e+

maintenance of their communal autonomy and traditional way of life.

4O. Tribal interests and rivalries still dominate the African politicalscene and are lik<ely toJnU1rUaes Il-p-il

Since the Lancaster House Conference the Africans have split into two rivalpolitical parties. One of these, "lAv" knuriya L±r±can1 Iva-L±uilaL unaUi,led by Mr. J. Gichuru (a Kikuyu), Mr. T. J. Mboya (a Luo) and Mr. A. 0.Odinga (a Luo), is built on an uneasy alliance between the aikuyu and uuu

tribes and demands independence for Kenya by 1962. The other, "KADU"(Kenya African Democratic Union), led by Mr. R. G. Ngala (a Coastal Afri-can) and Mr. M. Muliro (a Nyanza African), is supported by most of theremaining tribes. There are no fundamental direrences between the pro-nouncements of these parties. Personalities and tribal rivalries probablycount more than policies. "1ADU" leaders who claim to be more dedicatedto Western democratic principles seem prepared to accept a slower pace ofconstitutional development, but in their present contest with "KANJ" overthe African support, they feel compelled not to let themselves to be over-bid by "KANU". Both parties support strongly the release of Mr. Jomo Kenyatta(a Kikuyu) from his internment. Both parties are far from beingclose-knit units and political groupings and allegiances tend to changefrequently.

41. Although some African leaders, such as Mr. Mboya, certainly do notlack competence, a national political leader with a stature comparablewith that of, say, Mr. J. Nyerere in Tanganyika has not yet emerged. Inthe circumstances, various contenders for power tend to outbid one anotherin extremism. Tribal antagonisms distort the contests between variouspolitical leaders and may hinder the ascendance of the most competent man.Mr. Jomo Kenyattats name dominates the political arena as the Africanleader with the largest possible political following. Because of thefact that he was convicted of comlicity in the Man Man unrising. hnwevermost European settlers consider him anti-European and fear that, if inpower. he would seek vengeance.

2. "KANi" seems to have iler lr Per or m ffr-Tim n-qr+r n-rynni-

zation and has developed more aggressive methods in appealing to theAf-rinn nbih1i- Tn +.h ip-t.inno it. rrnn 16 of +he 3"conmmon roll" satsreserved for the African electorate, as compared with"KADU's"10. "KADU"(em in he enefithea a nm Oig facotAnrTs-) whi1 a nw i et

' ± -'I ~ -rJ - - -~ IW -.± fu 0 JV,-L"~

(mainly between the Mboya and Odinga factions), which are now claimed toh,-Vc0 -nn Q V.laAO

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43. After attaining a majority in the new Legislature, the Africanleaders (both "KANU" and "KADU") pressed for the immediate release ofMr. Kenyatta and fixing a date for attaining independence or so-called"UHURU". Many European settlers and probably many civil servants as wellconsidered that acceptance by the Colonial Government of the demand for therelease of Mr. Kenyatta would be a serious blow to the Europeans' securityand prestige and might result in increased capital flight and emigration.As for independence. the Government is reluctant to commit itself to anearly date until some major political and economic issues, such as thesenuritv of land titles and the status of the coastal province. are set-tled. The Governor of Kenya, therefore, avoided making any commitment inrePnet of these demands nlthough he made some concessions surh as agreeingto move Mr. Kenyatta to a station closer to Nairobi. In protest, "KANU1leaders refused to participate -in the ne-w- eiamniien unti +hz

were met, but "KADU" leaders in the end accepted the offers of office.A'". 14a hasJO b1.~ VVJ.1 V VJI .Z13J.. ~L.J UWJ lk.Lo 0 w WS. .. J ~ d

Education the title of the "leader of Government Business". The Europeanmemuers of te new GOuVernMent 4 - -u1 IR Duuu.L wuu u1 -u-e agri-culture portfolio,come mainly from the New Kenya Party. The new Govern-meit was succesful in uotaining irom tne uIueu ningdom Uverulnmunu bu-stantial financial assistance for the 1961/62 budget. Mr. Ngala also ex-pected, in order to strengthen his position vis-a-vis KkNU", new con-cessions on the Kenyatta and the independence issues. "KANU", in themeantime, apparently relies on its greater popular support to achieve itsaim of discrediting the "KADU" leaders and making impossible a colationgovernment supported by a minority African party alone. As a part oftheir campaign, "KANU" leaders may resort to techniques of mass protestsand strikes and these might cause some economic disruption. Despite re-cent reports by the European settlers of some deterioration in the securitysituation in the Kikuyu areas, the possibility of a major rebellion ofthe Mau Mau type is thought by the authorities to be unlikely. Mr. Kenyattais soon to be released and the major problem is whether his release will bemore conducive to the attainment of political stability and interracialcooperation.

44. When compared with the conditions prevailing in 1959, the attitudesof both the European and African communities towards each other have gonethrough some significant changes. Most Europeans now consider Africanpolitical control of the country in due course as inevitable and wouldprobably be prepared to live with it provided that their just economicinterests would not be hampered through nationalization, heavy taxation,harassment and other discriminatory practices. Some European settlershave also been deeply concerned about social developments such as increasedcorruption, lower standards and compulsory desegregation at schools andhospitals and the like.

)1q. In thp nonrRA of the nqt, var, qome further nman has henmade in eliminating segregation in African housing and a few grade schools.Splae mijo Afercan lar s I e recening then imewrat omodeteplace in the economy of Kenya have recently been somewhat more moderatethan they were a year- ago. This may giv sten- to the- a e 4 -1that

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with increased power and responsibility, the African leaders may attain

self-confidence and be able to afford to be less demanding in their rela-

tions with other racial groups. This would certainly be true if a moderate

African leader can attain undisputed prominence.

46. With a transfer to an African-controlled Government, a number ofEuronean civil servants are likely to leave the countrv and some declinein efficiency may result. To accelerate Africans' participation in theni vi 1 ;rvi ce. the Government intends to conduct an intensive training

program. Yet, the availability of qualified Africans for both public andnrvf. rn.-iA rrn myim I-nr qlinw -t.o ni-ach the rpnuirements of wmbitions

"Africanization" programs proposed by some African political leaders.Ton lov standars in qvmen rl -n hninsqqon h- nniqP w hv c1rcooperation between various racial communities and by Europeans' andAsimtancn+ining to fill positonn for which Africans could not.at pre-

sent offer adequately qualified candidates.

47. The crucial questions still remain whether the transfer of poli--- T- f -

1 7- -p -~ AF-nn -P-4%lrfl1 C - -Inv I -,n c -4 11 c- ,- 0 A-, ~1 -1~ r--Anv

ly and whether the immigrant communities will for the most part remain inthe country anid cotnet rvd aia n"a great ra 4 _1

which will certainly be needed to keep the government and the economyrunning. LModerain andU reasonab1leU coprto Uy the Af-riLcan -lealders- Li

progress towards early African-controlled self-government and eventualinuepenudence can IieI Une U1niz U power smooth anu uug to an uu

the present difficult transitory period with minimum economic loss. Itis Hardly possible to say with assurance wnich path the Airican Leadersmay elect and, should they decide to cooperate, whether they will be ableto carry their rank and file with them. One can probably say that overthe last year political differences between various racial communitiesand political groups have probably become more prominent and tribal anta-gonisms and rivalries may in future exert themselves more strongly in thepolitical life of Kenya.

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V - CREDITWORTHINESS AND CONCLUSIONS

Long-Term Prospects for Expanding Current and Capital Receipts

48. Assuming political stability and harmonious race relations, theprospects for Kenya's producing and marketing its major agricultural ex-

ports, retaining its position as the trading and banking center of theBritish East Africa, and attracting official and private foreign capital,remain reasonably good. Physical conditions. such as suitable land andrainfall, are not immediate limiting factors for further exoansion oforincipal export crops and future develooment will depend larRely on theworld price and marketing possibilities. Thanks to recent plantings, ex-norts of coffee. tea and other crops should increase substantially in theforeseeable future and should, in the long run, more than compensate forany future decline in thp world nrin.

%fee pWro ducrintin,- ma;inly Tiy Af-ri(-can or~rniP.q iq P3cPt.Pd to in-crease during the next seven years or so at a rate of about 2,500 longtons no r yar rnh11 ryl I ni vnt1 n+. tn nhni+. 7Z nor yoar P im tive. Tho

crop is predominantly high grade, mild Arabica (similar to ColombiaMedellin n d~ c-0 -,as a -rem_J, ,1m.y -pvic in the TVTrld. ma l tn . !;T,' I I - -- f

prices have declined somewhat over the last year (Table 28), but are stillV -,~ -F--i V-~ -,, ,Crr n,,- A,, TrJT, 0,i.e thn ,-,a - on 1C +I- Tr- -r ,r\

is still sold in West Germany, about one-fifth in the United Kingdom and

. .1. Iuure, mLU ar eu±ug of aegya' b klu wL11g LcU--e proUUUo L,.U1I U ve

expected to be difficult since the growth in the world demand for coffeeis Likely to remain at about au per year Latb year, the Uniteu AigUUm

Government on behalf of the East African territories, joined the Inter-national Cof(ee Agreement wicn extends from October 1, 1ou to September30, 1961. Under the agreement the British East African territories willwithhold from the "traditionl" markets a total of 200,00 bags-/ or aootT6% of their estimated aggregate exportable production. Kenya's-share ofthis is leyto be smiall (ab-out 3,0bags te J sposa" oftthrough sales in Africa and elsewhere may not be too difficult.

5l. The United Kingdom indicated that its joining the Coffee Agreementdid not imply any commitment beyond 1961 and that its future policy would bedecided in the light of a report from the Coffee Study Group on possible waysof solving the long-term problem of world coffee surpluses. If in futureKenya would agree to withhold a growing part of its total output, marketingmay pose a problem. At present most other countries in the Coffee Agreement(including Angola and the French African Community) are retaining 12% of theirexportable production and Brazil and Colombia a much higher proportion. TheKenya Coffee Marketing Board considers that it could increase sales in the"new" markets which cover a wide geographical area, including the Sudan, Iran,Arab countries, Soviet Bloc countries, Japan, Korea, South East Asia and theCommonwealth countries south of the Sahara. Efforts to develop a taste forcoffee among the local Africans, which so far have not been demonstrably suc-cessful, will continue and should provide an outlet at a subsidized price, forthe disposal of part of future surpluses.

< Bass of 132.3 lb. each.

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52* Physical conditions in Kenya are well suited for production ofcoffee and Kenya is an efficient and low-cost producer. At the lastseasonls auctions in Nairobi, coffee was selling at an average price ofabout '350 per long ton while the estimated costs of production forAfrican producers remained at about half of this amount. The qualityof Kenya coffee is good and relatively low world prices for coffee mayresult in some upgrading of demand from Robusta to more expensive Arabicaand may help in marketing of Kenya coffee. Kenya's coffee exports stillrepresent only slightly more than 1% of the world coffee imports. Becauseof these factors, Kenya growers have a strong competitive Position andshould have fairly Pood crosnents for narketin- their growing outout. Ifthe cooperation of the East African territories with other producing coun-tries thrnch the Tnternational Cnffee Acrepment can contribute to nrice

stability, this may provide a sounder hasis for planning future develop-ment and hould rive the Kona pronrners a earlv nash innme well u hove

their production costs.

53. A 16% common tariff on coffee, envisaged under the EuropeanCommon Market arrangements, may i Ih inne iin anm!ncrvc nn Prnancinnof coffee growing in the forner French territories in Africa. But thebulk of snch xVpansinn iq likely + he of nhi+.n +.n and in some auali

ty conscious continental markets, such as Germany, the Kenya producersshould be aeh + main-,ain +hir PoSii-on,+

aged and production is likely to increase during the next six or sevenyears. at a r at ofin auout -A V __ C- Ii.4.La.'J1 1.I jI ',z - - _LCL +id a J A --

per year cumulative. The Africans' share in the output is likely to beimporant in theZ _la.te; _sxis oMore tha e Iola olnut

sold in the United Kingdom, nearly a third in the East African market andabout a seventh in the U.D. and Canada. Over the last few years the qual-ity of the crop, though not high by the best Ceylon and Indian standards,has appreciably improved and it is now marketed in London mainly as amedium grade blending tea.

55. The East African market should expand rapidly as tea drinkingamong Africans spreads and their standards of living improve. Theestimated future growth in the world consumption of tea (at about 1-1/2,'per year) will not match the rate or growth of output in Kenya. Yet, asin the case of coffee, Kenyals production costs for tea are very competi-tive. Over the last year world tea prices have remained satisfactory forthe Kenya tea growers (Table 28) who are expected to remain in productionif the price declined from the present level of over U.S. buo per lb.(London) to as low as 354 per lb. In Kenya there are no export dutieson tea. Major European tea growin7 companies, such as the subsidiariesofFrooke Bond and James Findley & Sons, have easy access to large, world-wide trading facilities. With political stability and no discriminatorytaxation, the European companies will continue to expand their tea estatesin Kenya. Although the competition in the world markets is likely toremain keen, the marketing of the growing output may not pose seriousdifficulty.

56. Encouraged by favorable world prices, the increase in Kenya's

production of sisal was maintained during the last year. Asuring osubstantial change in the price level, a rather slow rate of growth isexpected in production in the foreseeable future. This would matchroughly the likely growth of around 5%0 per year in the world demand forsisal.

57. The production of pyrethrum, which increased about one thirdduring 1960, should be doubled within about five years. The bulk of theproduction (in both dry flower and the extract forms) is sold mainly inthe U.S. and, to a lesser extent, in the United Kingdom and Western Europefor use in the manufacture of insecticides. Although pyrethrum is a power-ful poison for insects, it is non-toxic for animals and humans. Becauseof this and of its knock-down effect.on insects,the use of pyrethrum ex-tract in the manufacture of insecticides has been expanding and the Price

prospects remain good. The Kenya product is claimed to have a larger drugcontent than its competitors from other countries.

58. The marketing of the Kenya pyrethrum is assisted by well-establishedtrade channels and aggressive sales promotion. Substantial efforts arebeing made by the Kenya Prrethrum Board to develop new markets and to findnew uses. The traditional markets should expand alon'- with the improve-ment in living standards and better care for health and sanitation. Thenresent disturbances in the Congo should have improved somewhat Kenya'schances for exDanding its sales and it remains to be seen whether thiswill constitute a permanent improvement. Production costs in Kenya arelow and very comDetitive. The break-even point for European producersis about U.S. 23 per lb., of dried flower as compared with the 1960 worldnrinn of about U.S.371 per lb.(f.o.b.). The growing nuamber of African producersshould be able to rema.n in production even if the world market Pricesdropned substantially below this level.

50. There is a nossible danrer in future from synthetics which mig,htreduce the demand for pyrethrum. Recent efforts to develop syntheticshnvp not. bn vprv ,uremann1 anrl thirP m no asuranom thAit, the anali -

ties of any new synthetic would match those of the natural product andthat its iroduction costs would be less. at least during the first few

years. Since pyrethrum is an annual crop, other forms of land utilization.qunh asq whea.t grrri ngy o-r qhFP.n rn;mi nry wuld be subs tiue i fasuces*ful synthetic would be developed to make production of pyrethrum unremunera-tiv-ei althnch this may rlnt in substan+ial nos in revennea

prospects for the remaining export products. At present price levelsi -- l ++1 11+k 4 0 + a, nr. A j ,, c-i atI -f' v,a++] ,ol -4i -- +-',,-+ -11ihS are

exported mainly to India and the U.S. for use in tanning industry. Ex-ports ~ ofCX ]Li es C VOA Li -~ Lua ~t 1I .U y JI-1 C u0ji.

have been expanding. In addition to the traditional United Kingdom1_,tZU, ±L JtLiastern i cu ntU L t--0, ~J PLL11U I)C J dIII L)Uit±Jii CL11U .UI d

becoming important. The latter area now absorbs over a half of the ex-ports of beef± anu uairy proucts, as co7m'ared ,V Lth uless W16,11 a ±I±LI1 Lll

195L.

61. Despite the favorable prospects for the expansion of exports,

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Kenya's imports are likely to exceed total export proceeds by a largemargin, and "invisible" earnings (both recorded and unrecorded) fromvarious services rendered to the neighboring territories are likely toremain an important source of income. Kenya is well established as thefinancial and trading center for the British East African territories.It commands important natural advantages, including its geographicallocation and favorable climate, and a substantial element of human ex-Perience and organization developed cver many years. W.hen Tanganyikaand Uganda achieve independence, there will probably be strong demandsfor transferring from Kenya to these territories some of the serviceindustries which directlv concern Tanganvika and ULanda. The prosoectsfor the establishment of an East African federation, which will be dis-cussed Inter. hnve an imnortnt beprin on this. In all probability.however, if it can maintain political stability and com'petence, Kenyatshighly speci li- 3izrvii indutries are lik.lv to nontinie to have animportant function in British East Africa. Ugandats external tradehasn o e channelod thrnh Kenya. There are nhvinu conomips in ornniz-ing some service industries on an interterritorial basis and Kenya can

has easy access and natural attractions, matched with reasonably adequatefaciliti es, fo itsnd ng_ -1-1 _+- ++,I

which has been very important in Kenya's post-war economic development,are diffic_ULtL taU predt:U(L With1 anly assurae.t: UndUbLtedUly, Kenya is atpresent undergoing a difficult period of transition and uncertainty.

lie present loss of confidence in cotn Vie European and Asian 'irduVrwhich together still account for more than two-thirds of Kenya's grossdomestic product, some 80% of its exports, and almost all manufacturingand service industries and technical and manaerial skills, has hadserious economic repercussions. The inflow of private capital has beenreversed over the last year and, unless confidence is restored, thereseems little likelihood of an enduring improvement. Since the commercialbanks have already overextended themselves and restricted credit, theywill no longer be able to cushion the impact of a continuing capitalflight. This may result in an aggravation of the present decline inbusiness activity. A drop in investment in both European and Asianfarming and trading sectors may, if continued for a while, have seriousconsequences.

63. If confidence can be restored before long and the capital flightarrested, the future of private foreign capital investment will be in-fluenced to a large extent by the outside investors! appraisal of Kenya'slong-term political prospects. It is encouraging that many Africanpolitical leaders appear to be appreciating the crucial importance ofmaintaining the confidence of outside investors. There are, however,great uncertainties and it is not possible to predict the future withmuch assurance.

64. In 1960 a fairly large inflow of foreign public capital, originat-ing mainly from the United Kingdom, has made up for a part of the drainin the private funds. It is likely that a substantial amount of official

-17-

loans and grants will continue to be available during the next year or so

until Kenya achieves independence. It is impossible to predict the supplyof foreign capital thereafter which may depend on many diverse factors.

It is also very difficult to evaluate the setback which would result from

a possible relaxation in Kenya's present close economic links with the

United Kingdom. A break with the United Kingdom's economy might requiremajor adjustments and could seriously affect the direction and prospectsof Kenya's economic development.

6r. Now thqt. Tanmanvika. Kenva and Uganda can see the orosoect of

attaining independence within a few years' time, an important questioncz ho-Mw+ the nyc zent- cse e,o-nomnic ti es nmong thesez tePrri torie caq .-n be,Z

maintained in future. All the territories concerned have benefitted from

and informal arrangements and have obvious economic interests in continuing

institutions and facilities. Recently at a conference held in London,conistin±g of representatives Of tue uutz:6 D1,L,11 Z±US A ~.L1-i-culagreement has been reached for the retention of the present High Commissionarrangement under a different name. AsIe from ts,tere have been sug-gestions for the establishment of a full-fledged East African politicalfederation. Significantly, proposals for a closer political associationoriginate not from the European settlers, but from African political leaderswho have now overcome their previous fears of domination by the Kenya set-tlers and may be motivated in part by pan-African idealism. The ColonialGovernments so far have not taken an active part, althougn they may be pre-pared to keep the conditions conducive to such a federation.

66. Partly because of the fact that Tanganyika will first achieve itsindependence, Mr. Julius Nyerere has been the major proponent of thefederation idea. He believes that an East African federation which mightinclude the present British East African territories (or, initially, Kenyaand Tanganyika, at least) and probably Nyasaland and Ruanda-Urundi later,should be achieved before the territories' attainment of their independence.A federation along these lines would be economically rewarding and couldhelp in solving some thorny political problems, including probably thequestion of the future status of the Kenya coastal protectorate, demandsby the Masai in Kenya for an extension of their tribal boundaries beyondthe Tanganyika border and the Buganda question in Uganda. By oroviding anew political arena, it might also contribute to a solution of the questionof African political leadership in Kenva. But to be realized. deen-rootedpolitical and sectarian objections would need to be overcome and timingposes difficulty. Tanganvika will attain its indenpendAnnA on TPember 9 ofthis year while Kenya may come to that stage probably not before a yearor two and Ugandn even later. MAny African nliticiann in enya and Tndra

feel that, before joining in a federation they should first obtain in-dPPdAn nrH ovi .ithi interynal n-robeims. At preent chance fo _a

early political federation of the British East African territories do notseem Iecr geat, althouhte god. f the cniao of the pree-close economic ties are quite good.

-18-

67. To sum up. although ideas for an East African federation are farfrom being crystallized and there are important obstacles to be overcomebefore serious progress towards this direction can be made, they indicatethat the likelihood of a complete economic split in British East Africanav not be very great. Moreover. a closer Dolitical and economic associa-tion in East Africa would, if realized, offer great opportunities forfurt.her economic prress in Kenya.

6T f pol iticanl stab iityr isq assired aqndl t.he im migrant. comrur! t esconfidence in the country's political future is restored, there are reason--,"klr '--A - n-c for,, Ken-'s~ nc~f,nnymr +n-ezin i+.c: g-krn,r+ 'h +. n j n ,

rate, say, at about 3-4% per year, leaving a real net increase of aboutff 00 __ __ ,n - - 4-1-, ~%,-- v +.-n m Thec -n

4 ua, I .+- -- ne rr'-vr,ln

however, may depend largely on the availability of foreign capital, InU U:I D-L tWII : :UUU1I, 1V - resu -~~ l 'U ~ II~ 1 -c Ui verm-nent's

program for developing the African sector of the economy have been impres-siLve andt ultese sOuld_L continue in future. A~ reu-Un J.1U1_- U -

Africans' income and productivity should expand the domestic market andsIOuu encourage growt in maanufacturing lauuc>urlltUIc. lluyc lito CL UVfImpoveWLUand skilful financial administration and it is important that its highstanduardsi S1J.U.LU Ut ffialiba±illu _L11 ±uLUUUt11*

oy Kenya's own external public debt, largely Q pounub uerng,

amounted to about $118 million equivalent at the end of December 1960. Thisrepresents an increase by nearly 4070 since 1955, when the Bankis first ap-praisal of the economy was made, of which about 18% was added during thelast year. Yet, since l9554 the export proceeds increased by about 5070.Estimated service payments on account of the existing debt fluctuatebetween less than $6.7 million equivalent and slightly over 411 millionequivalent per annum in the next 13 years. Including the service on theborrowing by mid-1961, the average annual debt burden on the present debtthroughout 1974 should represent about 6% of Kenya's gross current extern-al earnings in 1960. If a possible de facto contingent liability on accountof funds raised by the Kenya Government for the railways and serviced bythe latter is added, the total debt service would account for about 7% ofthe gross current external earnings. Should Kenya have to face the fullamount of her contingent legal liabilities, i.e. in the highly improbableevent of full default by Uganda and Tanganyika of their shares of thesubstantial amounts raised by the East African High Commission for therailways and other capital improvements in the East African territories,the total debt service burden would exceed 16% of Kenya's gross currentexternal earnings at the 1960 rate.

70. The present phase of the political contest in Kenya is between"KADU" and "KANU" over the former's participation in the new Government.Mr. Kenyatta has recently made some effort to bring the two parties togetheron major national issues. If Mr. Ngala succeeds in gaining support fromthe majority of Africans for his policies, the next sten would orobably behis appointment as the Chief Minister. Internal self-government may comethereafter. "KANU". in the meantime. will wage an intensive c;mpnign to

-19-

acredit "KAMH" and to keP the nressure on the Colonial Government for

coming into terms with "KANU". Issues like the political futureof .M .Y.rn++n are chared anndantly with nolitiol fire and rnin 1

susceptibilities. Serious political tension may not end in the fore-nb F+w T' ho.n" cenm o "ni+ 4in +.h+ +Ih mnin" nni -m1 nnrl

social adjustments required by the main racial communities will be madeWL Wl U OILL OUIIIUJ I ±~JUJIIL* kA LAP L .t L~ l 11 -~J __ -- U_IJ~AI ar O A -

fidence prolong disinvestment in the European sector of the economy or,

know-how out of the country, the immediate and long-term impact of such aor Lf Liuy e U liq~ %rUUJ.U _L11Ut=:U Utz ouiJ-JUU0 UL _Vt;1 L1_±L±±LitOueveLopiment un the nKU-1ya ecovunamy wuuiue eorveu vnozps

Political developments in Kenya over the last year have not eliminated someEuropean settlers' and foreign investors concern uhat thi might happen

in the foreseeable future.

71. Aside from the important contribution made by the European andAsian minorities, the United Kingdom at present remains the most importantsource of money and administrative talent for Kenya's economy and Kenya'smany political and financial institutions 4re cast in the British mold.Even when African controlled self-government is achieved the UnitedKingdom is likely to play an important part in promoting Kenya's economicand political progress. What will happen when self-government is succeededby independence cannot be foreseen. A closer association of the three EastAfrican territories, perhaps federation, is not impossible. In all theseuncertainties the guarantee of the United Kingdom provides an important re-assurance.

qTATT!TTrCAT. APPRNTY

External PiD1Ac T)-I1Service Payments on External Public Debt 2

Total Reported Employment 4UIVO 1.J V110U-~LcL C1V1UU U U uY LJ'uL0u1LLL v.L-iL,L -L.1L.J77C

Gross Domestic Product by Industrial Origin, 1954-1959 5-bUross Capital Formation in the Recorded .onetary Econory UEstimated Agricultural and Mineral Production 7

OAfrican Agriculture oIndustrial Production 9Electricity Generation and Distribution 10Money Supply 11Liquidity of Commercial Banks in Kenya 12Analysis of Commercial Bank Loans and Advances 13Kenya Land Bank 14Prices and Wages 15Terms of Trade 16Government Receipts 17Government Expenditure 18Government Expenditure (Breakdown data) 19Public Debt of Kenya Government 20Post-war Development Plans 21Forecast of Available Funds, for DevelopmentExpenditure 1960-63 22

External and Interterritorial Trade 23Domestic Exports (by quantity) 24-aDomestic Exports (in b million) 2b-bRetained Imports 25Kenya's Balance of Payments, 1958 26-aEast African Territories' Balance of Payments, 1958 26-bSterling Assets 27World Prices for Kenya's Major Export ComLmodities 28

Minor discrepancies in totals are due to rounding of figures.

Table 1

External Public Debt

Dec. 31, Dec. 31, Dec. 31, Dec. 31,____D_ _L7) U _______'90

± oe f ot hle "vat'ona' uovernment o iuu,i iva, o ____

(a) ublicly issued bonds (3,7929 7y,675 7,77k 3,400,000 inscribed stock4-1/2%, ±y930-196/7l 6, 790 5,741 5 ,4h _5,051

T305,600 inscribed stocks3-1/27%, 1933-1957/6in7 605 r15 st o5

1,375,000 inscribed stock3%, 1936-1956/61 8140 776 44~2 4~06

11,820,000, inscribed stock2-3/4%, 1946-1971/76 4,654 4,280 4,088 3,948

L3,710,000 inscribed stock2-1/2%, 1947-1965/70 9,643 8,907 8,700 8,582

n6,070,000 inscribed stock3-1/2%, 1951-1973/78 16,341 15,317 1L,991 14,647

b12,625,000 inscribed stock4-1/2%0, 1952/53-1971/78 34,602 32,719 32,074 31,436

14,225,000 inscribed stock5%, 1956-1978/82 - 11,574 11,Wt 11,245

(b) Privately-placed debt - - 2,150 2,150L518,000 Barclays OverseasDevelopment Corp. to Govern-ment of Kenya 7%, 1959-1969 - - 1,450 1,150

L250,000 Sceptre Trust Co. toGovernment of Kenya 6-1/2%,1959-1979 - - 700 700

(c) IBRD Loan - - - 5,600$5,600,000 loan 6%, 1960-1970 - - -3767

(d) Interaovernmental loans 16,050 20.303 2h.503 38.997118,333 U.K. Government loanfor Colonial Development andWelfare 3-1/2%, 1933/41-1955/61 650 3 3 2

16,050,000 U.K. Government loan,interest free. 195L-1987 9.800 1h.700 11.700 169h0

m2,000,000 Colonial DecelopmentCorn. loan 1-1/21 194-1984 c nn C.A 5,600 , An 76

1,500,000 U.K. Exchequer loan5-1/9, loCo-19A8 - ,20nn '119

151,500,000 U.K. Exchequer loan5-7,/A%, 190n-198 . - ,29n

External Public Debt (cont.)

&1,000,000 U.K. Exchequerloan 6-1/4, 1960-1985 - - 2,800

T2,000,000 U.K. Exchequer loan6-1/2%, 1960-1985 - -5600

E2,000,000 U.K. Exchequer loan6-1/2%, 1961-1986 -

E330,000 U.K. Exchequer loan6-1/2%, 1961-1986 -

II. Debt of Political Subdivisions 11,979 10,671 10,313 10,002

(a) Publicly-issued bonds 9,132 8,038 7,795 7,527M1,500,000000 City Council ofNairobi Reg. stock 3-1/f%,1949-1970/7L 3.760 3,269 3,161 3,03062,000,000 City Council ofNairobi Reg. stock 4-1/2%.1954-966/66 5,372 4,769 4,634 4,497

(b) Privately-placed debt 2,847 2 j$j 2,518 2,75M1.000.000 City Council ofNairobi Stock 4-1/2%,1940-196iL/6 2.800 2.520 2.il) 2.380

T50,000 National Bank of IndiaFinnnnp nnri T)avP1nnmPnt. Corn.

loan to Nairobi 3-1/2%,loi0lon 39 11'A Inh 9c

520,000 National Bank of IndiaPinnnnm nnA naovra1nmntYnan+.rr-n

loan to Nairobi 3%, 1948-1955 8 - -

101,504 110, 03 11,61 132,523

IIT, Less: Loans raised for East Afri-can Ra Tniway andl NnT%nir"zA A1mi-nria-

tration 16,626* 15,156 14,653 1,262

13,400,000 inscribed stock1._-1 I')Cl' -I nVt n n /'7 -I CC 4 -1 /,1 nL-Ll -/Q, .L.L/-0J/ L C_'j L, 7Q7 _L, UU?L, C)

I1,820,000 inscribed stock,0 1 - ILCI ~l n /'74L ri 1. 4 rrl 1. r..-)A410, L7L4U--7(/ IU 4pu2L4 14u, r-UuJ 4,VJU )L4u

3,710,000 inscribed stockC-L//Oji .J74(tJ7U)/(V ~ 7,UL4_) U7fUj UCV

Net ueoT utstanding 04,o0o y1o14 YY,Yoo 110.?O-L

EstimatedThe following additional loans were raised during the first half of 1O.L:;2 million U.K. Exchequer loan, 6-1/2%, 1961-1986

L330,000 U.K. Exchequer loan, 6-1/27, 16-19d0.

Source: IBRD Statistical Division.

Mt2- '

_ - , ___ n I - - ,c.Service Payments on External ruouc Deau

(in thousand4)

Total Direct Liabilitv for Service Total Contingent li-On Kenya's On Kenya's own debt ability, shared with

Year of pay- own debt and debt it incurred other East Africanment for railway territories, on the*.

High Commission Debt(1) (2) -

1986 (actual) 2,688 3,0471950 "7,8600 8.,592 5211953 3,756 4,490 2,9681955 " 3,917 4,651 5,0621956 " 4,166 4,900 6,3981957 " 4,808 5,542 7,8371958 "1 4,768 5,502 10,2561959 " 5,281 5,737 10,2731960 " 5,630 6,16h 10,306

1961 (projected) 7,591 8,325 10,2911962 H 8,163 8,897 11,2531'63 8,281 9,015 11,23819614 8,920 9,65L 11,2231965 " 8,904 9,638 11,2101966 " 10.803 11.537 11.1941967 " 9,014 9,7L8 11,1811968 8.661 9,395 32.89899 " 8,516 9,250 2L,694

1970 11.389 19.115 17.8771971 7,938 8,760 19,8121972 .71h I-90 7,21n1973 ? 6,695 6,886 7,225197 4 8.037 8.228 11.216

* Proiefted navments are based on debt outstanding December 31, 190. with mainradditions to June 9, 1961.

M In addition to service due under (1) and (2). Payment is jointly and severally

Table 3

Population Growth(thousands)

June 30 Estimated Natural Net gain or Total increase % increasePopulation increase loss by during the over previous

during migration year yearthe year

1947 5,311 76 + 6.5 831948 5,399 80 + 8.1 88 1.71949 5,1089 81 + 9.2 90 1.71950 5,579 82 + 8.0 90 1.61951 5,669 82 + 8.2 90 M61952 5,760 8h + 7.3 91 1.61953 5,851 84 + 6.8 91 1.619154 5,948 87 + 8.5 96 1.71955 6,048 89 +10.6 100 1.71956 6,150 93 + 9.2 102 1.71957 6,254 96 + 6.7 103 1.71958 6,351 96 + 3.9 100 1.61959 6,450 95 + 3.2 98 1.61960 6,551 99 + 1.h 100 1.6

Racial Composition

1946 % 1953 % 1958 % 1960

African 5,087 97.32 5,64 96.46 6,080 95.73 6,264 95.62

Asian 88 1.68 131 2.24 165 2.60 174 2.66

European 25 0.48 2 0.72 65 1.02 68 1.nO

Other 27 0.52 34 0.58 hLi o.65 45 0.68

Total 5,227 100.00 5,851 10000 6,351 100.00 6,551 100.00

Aource: Quarterl-y Eiconomie- and Statistical Bulletin and East AfricanStatistical Department.

Table h

Total Reported Employment*(thousands)

1946 1951 1953 1955 1957 1959 1960

In Agriculture:Euopan. . 1.5 1.8 1. 1.8 0.

Asian 0.5 0.5 0.3 0.4 0.5 0.6 0.8Africn 107. 2 2 2 11 2 1 9. 7 2C1 1 )].0 2 D6. 1

.. Lt 1 *,, I iJ..t c.$> ýy .J tL, *.J LAJ -7 1

n P1 ri vate Indusru-L-yand Commerce:European . 73 . U1.6 U 1. 12.0 2.Asian 10.14 17.1 18.6 23.6 25.8 25.1 25.6African 1 1ir 0 -123.7 1-. 1 6 . - 1.0 1 .i r, i

in Public Service:European -C3.6 5.3 7.0 10.0 9.2 9.0 8.9Asian 7.3 8.1 9.5 10.6 10.9 11.1 11.8African 78.8 93.h 118.0 155.0 146.9 10.0 10.7

All ESmployees:European 8.7 111.0 16.9 22.h 22.4 22.8 23.1Asian 18.2 25.7 28.4 34. 6 37.2 36.7 38.2African 376.8 412.4 h53.0 558.1 55.8 537. 560.9

Total 403.7 452.1 498.3 615.1 614.4 596.9 622.2

* As of June 30 of each year.

Source: East African Statistical Department.

Table 5-a

Gross Domestic Product by Industrial Origin, 195h-1959(T million at factor cost)

Sector Gross Product in the recorded monetarv economy1954 1956 1957 1958* 1959* 1960*

Agriculture 19.82 24.90 23.78 24.25 25.32 29.58Livestork 6.37 7.72 A.- n(-, .26 87 9.30Forestry 0.55 0.81 0.68 0.68 0.79 0.81Fishing and hunting 1.65 1.62 1.02 0.90 0.89 -

Total (agricultunre) 28.39 35.05 33.56 36.6 355 b0.78

Tr-fl nc ~n e nný nin-yrrnry o-Ro -1~ 4 1 9 i 91ý 1 19 nQ(

Manufacturing 1).l 18.18 19.80 20.52 20.23 21.62nstruction 6-31 9.3h 9.63 8.38 7.9r 7n.85

Electricity and water 1.24 1.75 2.09 2.36 2.56 2.79Transport, Q+rag,en and comniation 11 . 15 . 7R 1 R 6 17 .6 103 n i 19 oWholesale and retail trade 21.59 25.83 27.h8 26.39 27.68 28.55

P.ents (including ownership ofl,-ligs 4. 5.c 6.6 7.51 p .05 .7n

General government:4,±4ninistrationý -- -p ).6 9.2 9.72 9.8 Pn .9C1 n0.6V.WOUcU.U1UU 7. L1J 7. 1L 2.,_7 7.7-L J-k .U

Public health and education 2.52 3.15 3.88 h.73 5.19 5.98icultural and related sr vicesUU .8. U .77 -.L6

Local authorities 1.61 2.29 2.53 2.89 3.15 3.32Defence -. 7 .4 2. 13 .3Overseas governments (local

employees) U. 0 .05 0 .O 0.06 0. 0.12

Total (general government) 13.94 18.81 20.19 20.46 21.53 23.32

Services 7.90 10.73 12.11 13.11 14.58 15.50

TOTAL 112.45 145.-15 154.22 15 5.-50 161.76 173.69

* Pevised:Preliminary estimate.

Source: East African Statistical Department and Economic Survey 1960.

Table 5-b

Gross Domestic Product by Industrial Origin, 195)1-1959rd1JL.LI ~ .UC L J U OU o /

1Lta- Uross Iro UUcU Lnc.LU ULng~ _L11PUUU pivuILtu U

Sector outside the recorded monetary economy5!24 L~ J.7 ) -7)U ±7)7" -±7 ,_,"V

r-- o' r~~ 01 Z- ni- Lon Z- 1-. rr%

Livestock 16.50 18.35 19.78 20.07 20.23 20.23rn 0 n 1 or- n~ -Ir -I n

Fishing and hunting 1.93 1.90 1.23 1.10 1.09 1.32

Total (agriculture) 73.96 83.28 85.23 86.84 87.84 89.88

Mini ng and quarrying 0.89 1.36 1.26 1.23 1.12 1.09anufacturing 1L.1L 18.10 19.80 20.52 20.23 21.62Construction 6.31 9.34 9.63 8.38 7.94 7.85Electricity and water 1.24 1.75 2.09 2.36 2.56 2.79'ransport, storage andcommunication 11.81 15.78 18.64 17.69 19.03 19.94

Wholesale, and retail trade 21.59 25.83 27.46 26.39 27.68 28.55Bancing, insurance and real estate 1.3C 2.52 2.83 3.26 3.46 3.5hRents (including ownership of

dwellings) 4.83 5.80 6.65 7.51 8.05 6.70General government:

Administration 6.68 9.20 9.72 9.89 9.91 10.68Public health and education 2.52 3.15 3.88 4.73 5.19 5.98Agricultural and related services 1.31 1.58 1.88 1.78 1.77 1.86Local authorities 1.61 2.29 2,53 2.89 3.15 3.32Defence 1.78 2.54 2.12 1.11 1.43 1.37Overseas governments (local

employees) 0.04 0.05 0.06 0.06 0.10 0.12

Total (general government) 13.94 18.81 20.19 20.46 21,53 23.32

Services 7.90 10.73 12.11 13.11 14.58 15.50

TOTAL 158.02 193.38 205.91 207.75 21h.03 222.79

Revised> Preliminary estimate.

Source: East Afri-e.n Statistic-a1 Dpnartment and Economic Survev 1960-

Table 6(t TM-i11 -on)

Gross Capital Formation in the Recorded Monetary EcononyIT - 2 -\ ILL LLnLu )11

Years Residential Non- Construc- Transport Plant Total Of whichCa BuilJding Residen+ial -ion E t - andas passen e6 r

Private Building incl. air- machin- carsceto craCft er-y

1950r~ 3.o. 0.7 . 7 .3 13) 7 1.

1951 3.3 2.6 0.7 4.2 6.4 17.2 2.31952 K.n 3 . n. 0. 8.1 20n . 21-L7)r 4 . uI u. u~ U. L u. Le4 -L.

1953 3.4 4.0 1.1 2.9 8.0 19.h 1.613. 3..7 n.7 4.7 .Lu51955 4.9 4.1 1.8 7.6 6.k 24.8 3.61 n7 r-.9 2.1 7.8 8 0. 7 n 3.9

1957 6.3 4.2 2.9 8.5 7.3 29.2 4.61958 5.5 L4. 3.2 7.9 5.6 26.7 L.1959 5.3 4.6 3.2 7.6 6.0 26.7 4.h1960* >.1 3.5 3.2 9.9 6.>4 27.2 5.6

kb)PublicSector

1950 1.5 1.8 3.3 0.6 1.1 8.31951 1.1 1.8 3.1 1.1 1.1 8.21952 1.5 2.3 4.6 0.8 1.2 1o.!1953 1.8 2.8 6.1 1.0 1.4 13.11954 2.5 2.0 8.1 2.7 1.4 16.71955 2.5 2.7 8.2 4.1 1.5 19.01956 2.1 3.4 5.6 1.6 2.2 1L.91957 1.7 3.6 8.5 0.7 1.9 16.41958 1.6 2.6 7.1 0.6 1.6 13.51959 1.9 2.5 7.1 0.8 1.4 13.71960* .. .. .. .. .. 13.8

(c)CombinedPrivate

andPublicSectors

1950 4.7 4.6 4.0 3.3 5.4 22.0 1.31951 4.4 4.4 3.8 5.4 7.5 25.5 2.31952 5.5 5.8 5.5 4.7 9.3 30.8 2.:L1953 5.2 6.8 7.2 3.8 10.0 33.0 1.81954 5.9 5.0 9.8 8.h 6.1 35.2 3.31955 7.4 6.8 10.0 11.7 7.9 43.8 3.81956 9.8 8.3 7.7 9.ä 10.å 45.6 11.01957 8.0 7.8 11.4 9.2 9.2 45.6 11.61958* 7.1 7.0 10.3 8.5 7.2 L0.1 L.)1959* 7.2 7.1 10.3 8.4 7.4 4o. 1.41960 . .. .. . .. l.O6

Z PDeliminar - 195-I1959 data for Private ector revised.SDurce: The Treasury, and Economic Survey, 1960.

Table 7

Estimated Agricultural and Mineral Productionki.LL -Luall allu no-ilU. ±l .LL dlIT lIfI

ThousandThousand long tons tons Thousands

Clean Pyrethrum Sisal Tea Wheat* Soda Ash Cattle PurchasedCoffee* for Slaughter

1930' 12.h4 1.9 31.8 5.7 2L1.5 27.6 n.a.1946 9.0 6.7 27.0 5.5 73.0 84.6 95.419514 12.3 2.1 3b4.4 7.8 132.6 96.1 76.11955 23.9 2.7 37.9 8.5 120.9 124.7 89.21956 10.5 3.1 39.6 9.5 125.1 14.3 85.21957 20.8 3.4 41.1 9.8 102.1 118.8 77.61958 23.4 3.8 16.0 11.2 96.2 111.6 109.21959 23.14 4.8 55.2 12.4 127.4 151.4 110.31960 32.84* 8.5 62.6 13.6 108.3 124.5 151.6

* Crop years 193b/39, 1946/47, etc.Preliminary estimates.

Prices Paid to Producer

Clean Coffee Pyrethrum Sisal Wheat "A" Grade(L per ton) (Shs. per cwt) (Shs. per cwt) (Shs. per bag Meat (She-

of 200 lbs.) per lb..)

1946/47 112 140.0 35.5 27.85 0.5010954/55 427 276.1 6h.6 52.00 1.101955/56 137 293.2 59.1 51.00 1.101956/57 521 292.1 59.9 52.66 1.181957/58 438 288.0 53.3 52.00 1.201958/59 393 285.1 53.3 58.50 1.201959/60 3F9 302.6 67.8 50.00 1.201960/61 325** .. 81.6 50.00 1.25

;* Estimates.Source: East African Statistical Department. Quarterly Economic and Statistical

Bulletin.

Table 8

African Agriculture

(a) Estimated Acreages under the Cash Crops Program

AcresCrop 193 1955 1958 1959 1960

Coffee 3,702 8,515 24,669 26,161 33,100Pineapples 3,051 3,110 4,588 17,610 17,300Pyrethrum 1,300 1,829 5,775 12,292 13,L00Tea 37 206 857 1,598 2,300Sugar cane 200 L25 1,087 3,000 3,000Wheat 800 1,500 1,559 1,695 1,900Tobacco - - 2,033 1,002 3,900Rice 5,100 8,500 9,63h 10,935 15,400Potatoes 1,000 3,000 1,060 26,375 16,300Cotton 110,000 141,000 111,219 91,350 95,300Coconuts 43,900 51,600 62,900 71,580 76,100Cashew nuts 7,900 10,000 6,500 9,605 14,600

(b) Princinal Products Marketed from African areas(in thousands)

1955 1958 1959 196CUnit Quantity Onantity Quantity Value Quantity VaLie

1000s 000s 000s (M000's) '000s (T00CC

Coffee Tons 1.0 2,3 3.6 1,830 4.6 2,2)1w 1 a? [9.7 25h 181 191 19.0 PIS

1'aize " 91.8 69.6 79.7 1,006 73.2 960Cot+nt + n n 3A nA 6q 199 79 CQ

Copra 0,6 2.0 2.0 128 1.8 37

Rice "5.7 5.3 4.3 103 9,8 265

fPrethrum" 0.3 0.4 0.6 200 1.8 5L5ashew lits 1_ 1 3.3 120 5.0 193

Hides Number 502 h71 - 461 - 02Q11 i 10 cfo 01A 000 0e1. 10(

Kenya Meat Commission (KMC)

Cattle Head b3 25 44 h48 54 594

Goats IT 102 130 108 134 107 133

Total Gross Revenue* 8,350 9,6?4

TIhe LiVeStUCk Co0ponen Uf T0ta Revenue is caulated o incUlU 1u alsU sLedSother than to K.M.C.

Source: for (a); Sessional Paper No*77 of 1956/57 and data provided by the KeryaAgriculture Department. (1959 data taken from Agriculture Depart-ment Statement of Crop Acreages.)

for (b)- Department of Agriculture, Annual Reports.

T1bl 9

Industrial Production

Gross Production ImportsJ1956 1957 1956

Carining (Fruit and Vegetables) 826 650 151 110

Confectionery 103 100 321 3

Sugar 827 1,117 1,692 1,68(7Tobacco 3,077 6,38 70 76

Beer 3,870 4,170 99 137

Beer Dialt 250 266 171 30

Clothing and Textiles 1,2h8 1,355 765 64o

Shoes 905 PAI 2 22)

Furniture (excluding Metal) 985 874 109 106

Paper Bag and Box 399 600 26 519Fertilizers h7 88 657 76

Soap* 1,0 95Pharmaceutical Products 119 153 590 850

Faint* 40*- 30 668 563Insecticides n.a. 192 439Bricks and Tiles 233 213 p17Refractory Tiles* 31 19 62 57Cement 2,239 2, 216 9

rottles n.a. n.a. 200 160

Salt 199 179 65 27

Sawm Timber 1,886 1,567 2 6

ietal Goods Industry:- of which(a) Aluminui Hollow-ware 430 609 12 23

(b) Steel Drums, Tanks & Guttery 720 510 L50 b L

(c) Cans & Containers of Tin Plate L00 660 n.a. ]'egliLJ-ble

(A) Wire Nails 80 110 72 24(e) THetal Doors & Window Frames n.a. 527 210 _63

1. Total value of industrial production 12,958 25,188K Value of 2imi'r GoInc]. st,ill

i,porte~d 7,863 7,757

** Estimated

Source: East African Statistical Department and, Surveys of IndustrialProduction, Kenya, 1956 and 1957. Also Annual Trade Reports.

Table 10

Electricity Generation and Distribution

Installed Capacity of gen- Total Generated and imported Total saleserating nlant (thousand KW) (million Tfuh) (Million WTh)Total of which:hydro Total Generated Imported

1938 10.3 6.4 17.2 17.2 - 13.7

1946 16.0 6.7 44.9 4b.9 - 3L.5

1950 26.5 7.0 95.8 89.0 6.8 75.8

1953 U8.1 15.6 163.3 150.2 13.1 132.8

1955 66.3 25.b 230.2 208.0 22.2 1911.6

1.956 81.3 26.0 268.8 245.7 23.1 233.1

1957 85.0 26.0 291.3 267.9 23.4 2b2.7

1958* 82.3- 26.0 327.7 213.7* 114.0 266.6

1959* 81.1 26.0 363-3 212.2* 151.1 301.1

1960 81.1 26.0 402.6 221.3 181.3 335.7

The decline in the capacity is due to imports of power from Uganda, commencedin January, 1958, as a result of which several power stations in the Nairobiarea were closed down.

Estimate.

6ource: Statistical Abstract, 1960 and data received from the Government.

Table 11

Money Supplv(n million)

(a) Currency circulation in East Africa*

In Circulation inJune 30 Total Currency Coins Notes East African British Somaliland

Territories and Aden

1938 6.5 3.8 2.7 6.5196 246.5 7.2 17.3 20.9 3.71917 2>.) 7.3 17.0 20.7 3.619L,8 23.7 7.1 16.6 20.2 3.51 9)9 27.2 8. 18.9 23.9 3.31950 29.6 8.9 20.6 25.6 3.9

19139.14 l11. 28.4 35. x.1

1952 L8.3 12.8 35.6 39.9 8.51953 148.6 11.3 37.3 b1. 7.6195l 53.3 11.5 41.8 45.5 7.8

1955 6. 11. 9.537 6.73956 60.7 11.2 49.5 54.2 6.6

O957 60.7 inA 0 .1 1.3

1958 58.7 9.9 48.7 52.2 6.5[95 57.3 9., 7.8 o. 7.1

L41 '. _-.'*'i 1 -

190 60.4 9.4 51.1 52.5 8-o

(l, IMoneIyJU!L Sup l ieatL AfrLi-ca (kenlya, Ugandla ankTnanik)

by the C urrencyBcardUasI- WithI Dem-and' TIme andiu sa-v- and Bankxs (iLnel. P.O.

June 30 public deposits Total ings deposits Savings Banks)

1954..3 76.9 121.1 31.2 91,21957 Q6.4 76.3 122.7 32.5 92.3

458 15.5 68.4 114.0 35.4 77.51959 yL.5 71.7 1O.2 3.(4 7801960 46.7 70.0 116.7 33.8 56.0

Data for Kenya alone are not available.

Source: East African Currency Board and East African Statistical Department.

Table 12

Liquidity of Commercial Banks in Kenya(million)-

Deposits Liquid AssetsDec, 31 Demand Time Savings Total Loans and Cash Balances Total Liquidity

Advances abroad--> Ratioand BillsDiscounted

71) T~ (3) M4) (5) (T ~7)7 78) H:bY)

1938 3.2 1.7 0.3 5.2 2.9 1.3 1.8 3.1 6n

9 20. 2.2 1.1 23.8 2.8 3.3 15q 1Q9 R1%

19 30.1 2.5 1 0 33.6 11. 1.8 17.6 19. 58K

1953 37.6 2.8 1.6 ),1.9 20.3 2.3 17.1 19. 6%

1955 51.9 2.8 3.2 57.9 141.3 1.9 11.6 13.5 235

1956 3.. . 3. 2.2 1.5 12.7 2

197 9 9 2 5 53. 3 9. 2.5 .0 .20,%

95 31 6. . 3t 3 10.r 3 26I%

June 30 43.7 5.8 6.7 56.2 36.4 2.4 111.5 l.9 305ket3 _ 2. 5.9 7 c r' . -. 5 3.7 2.3 1-. 1.4 24p

Dee. 31 44.0 5.9 7,1 56.9 37.5 2.3 11.6 13.9 21.,7

-1, ou r

March 31 44.6 5.6 7.0 57.3 41.8 2.8 8.0 10.8 19%June 30 120 1.5 6.8 53. 43.u7 2.0 2.8 4.8 95Sept.30 34.5 5.0 6.6 46.1 44.3 2.1 -4.8 -2.7 -

D.1 4.3 4.4 5.5 50.2 42.2 3.0 -02 2.8 65* The different categories of deposits are defined as follows:-

Demand: subject to transfer or cashing by cheque at sight.Time: usually not subject to transfer by cheque and lodged for a definite

period subject to notice of withdrawal.Saving: Lodged for no fixed period of time, and not subject to transfer by

cheque.

':÷ Inciuding balances held in other East African territories.

Source: Statistical Abstract 1960 and East African Statistical Department.

Analysis of Commercial Bank Loans and Advanceski million)

As at December 31 Agriculture Industr7 Other Total*/

1938 2.9

1946 0.9 0.4 1.4 2.8

1950 1.8 1.6 6.5 11.4

1953 h.8 2.8 10.2 20.3

1955 5.7 L.3 25.3 L1.3

1956 1.9 3.7 21.9 35.7

1957 5.9 4.2 23.0 39.2

1958 4.6 6.2 18.3 34.3

1959:

March 31 3.7 6.1 21.7 36.3

June 30 L.2 5.9 21.8 36.

Sent. 30 .2 22.1 37a7

1960:

March 31 4.8 6.8 24.9 41.8

June 30 5.0 6.1 27.3 h3.7

Sept. 30 7.0 5.4 29.2 44.3'n- E n' ') 04 e 1.0 r)

categories.

Source: Statistical Abstract, 1958 and East African Statistical Department.

Tabli ]i

KeP=a Land Bank

(Thousand 5)

the yearYear Balance of Long Term Short Term Repaymen+ c nT.sriý e d Ba debts

loans out- and Chat- during to Land Bank writtens Itding as. t~1Uels ort-~ the ye ar ne -- f-- - durat 31st Dec.* gages during the the year

-J946 546 138 h 88 1 4

948 673 199 7 171 - 59i991149 0 0 6Uu u 86 -950 1,036 249 13 127 - 6

S1,062 200 5 -

952 1,184 27h 3 156 -. 1,953 1,370 281 5 105 - 5

'954 1,604 33ý3 10 114 -1955 1,928 448 6 129 1956 2,286 487 11 140 -

1957 2,846 716 13 169 -

2,990 265 7 128 -

1959 3,197 387 6 186 -

96o0 3,557 613 lb 245 21

* Principal only

Showas farm properties taken over by the bank (positive balance) and saleunder agreement of these properties (negative balance).

$'ource: Statistical Abstract, 1960.

Table 15

Prices and Wages

(a) Cost of Living Index (August 1939=100)

December 31 Nairobi European Index Nairobi European Index(Tobacco Food an (all groups)

Drink) Average Weighted Index

1947 175 1751951 229 2251952 257 240

195 26 248

19A 277 259

1956 298 279

1958 292 288

1960 296 290

(b) Average Earnings and Wages

Average European Earnings (Man) Statutory MinimanPrivate Inausty oPublic Services African Wages (for

and Commerce (inc. Local Govern- workers over 21)DEcember 31 ki per annum) ment) (Nairobi)

(__per annum) (Shs per Month)

1947 722 712 38/-1951 940 919 28.501952 1,073 1,032 L3.500953 1,16 1,046 52.501951 1,225 1,114 62.501955 1,366 1,229 75/-1956 1,396 1,256 82/-1957 1,470 1,378 85/-1958 1,526 1,436 85/-?959 1,539 1,483 95/-1960 1,81 1,503 102/-

Source: East African Statistical Department.

Tahl 16

Terms of Trade(1954=100)

YeaImortPrielomestic Export-s Terms of Trade

.Lear U.DrtJJi1~ U-L £:~4. uJ I. ~ "4 -- ~--Index Price Index. A x 1(N

1948 92 6 16h

1950 93 87 107

1952 123 106 116

1954 100 100 100

1955 103 95 108

1956 108 9h 115

1957 110 91 121

1958 102 8 121

1959 in. 7 123

Source: East African Statistical Depar+:ment; Quarterly Economic andStatistical Bulletin.

Table 17

Government Receiptskincluding Loans and Grants)

millionneviseaest.

A. Taxes, duties, fees, etc.Income taxes and estate duties 11.3 12.7 13.0 13.7 12.4 12.hExport taxes 1.7 0.2 - - - -

import duties 9.4 8.5 8.1 9.5 10.7 11.3Excise duties 2.8 2.6 2.9 3.2 3.2 3.5Other taxes on expenditure,

licences and fines 2.5 2.7 2.8 2.9 3.0 3.2ProPerty taxes and rents and

interest 1.4 1.5 1.5 1.4 l.h 1.6Currency Board Surplus (Kenya share) 0.2 - 0.2 0.b 0.4 n.a.Fees collected by various Government

departments on provisions of goodsand services 2.3 2.3 2.6 3.0 3. 3.7

Total (taxation, etc.) 31.6 30.4 32.0 3b.1 34.6 35.6

B. ReimbursementsReimbursements from local

authorities 0.2 0.2 0.2 0.3 0.3 0.3Reimbursement from High Commis-

sion, Railways, etc. 0.8 1.1 1.5 1.0 1.0 1.0Loan repayment 0.1 0.1 0.1 0.3 0,2 0.1Total (Reimbursements) 1.1 1.4 179 1. 1 1

C, Grants from abroadHmergency grant from U.K.Government 10.0 b.0 1.5 0.8 0.8 -

C.D.W. (Swynnerton) 1.3 1.5 0.9 0.6 0.4 -C.D.W. (other) 0.7 0.3 0.8 0.5 0.h 1.9I.C.A. - - 0.8 0.1 0.1 -Other 0.1 0.1 - - 0.1 0.1

D. Loans RaisedIn London (including Exchequer and

Emergency Tnans) h.O - 1.5 0.8 -. 8 5.,Locally 2.5 2.5 2.2 3.7 2.2 0.)

-n-C. - 01 0.3 0.5 - -Other - - - - 0.4 0,9To)ta.l (ra-ntsq and lonns) 777 770 77_ 771

F Mi S cellan ne 1Extra exchequer receipts (less

and Currency Board Surplus) 1.7 - 0.3 0.2 0.2 0.6

Withdrawals from Renewals andU WAier V. undsU V.U 'j', I ' -j, I \ j.J

Other 0.5 0.3 0.5 0.h 0.7 0.110 \a IiLscellianOUub *U s*) I*I J1) j*7 X.

GRAND TOTAL 5 43

Source: Quarterly Economic and Statistical Bulletins and East African Statisticaleoar tmenu tua 'earrngeu).

-&ao±e n o

Government Expenditure(including both Current and Development Expenditure)

L millionActual Estima-ce

1955/56 1956/57 1957/5ö 1956/59 1959/60 196/61A. General Government

Defence 1.6 2.2 1.8 1.7 1.6 0.5Revenue Collection andFinancial Control 0.8 0.8 1.0 1.1 1.1 1.2

Other 7.6 9.1 9.8 10.7 10.8 12.4Total 10.0 12.1 12.6 13.5 13.4 1..1

B. Social ServicesEducation 4.8 5.4 5.9 6.3 7.0 7.9Health 1.9 2.2 2.h 2.3 2.5 2.-Labour 0.2 0.3 0.3 0.3 0.3 0.4Community Development 0.1 0.1 0.2 0.2 0.2 0.2Water works 0,7 1.2 1.0 3.1 1.1 1.1

Total 7.7 9.2 9. 12.2 11.0 12.2

C, Economic ServicesAgricultural 3.7 4.0 2.9 4.0 3.5 3.8Veterinary 0.9 0.9 1.0 1.2 1.2 1.3Forestry 0.3 0.5 0.4 0.4 0.4 0.7Games, Fisheries,

National Parks 0.2 0.2 0.2 0.2 0.2 0.3Lands, Mines, Survey

and Geologv 0.3 0.1 0.4 0.4 0.h 0.6Comnerce and Industry 0.5 0.4 0.4 0.2 0.2 0.2Roads 2.0 2.1 2.0 2.1 2.6 2.8Other Transport 0.5 0.6 1.1 0.5 0.5 0.9

Total 9.I, 7¯0 92i.1 1.~6

I rårrrt. i nnn,-ia

ObligationsPublic Debt 1.8 2.1 2.5 2.7 2.9 3Pensions & Gratuities 1.0 1.3 1.4 1.4 1.4 1.5Passages 0.h 0.5 0.7 0.7 n.6 n-.8

Transfäers to localauthorities 0.9 1.5 1. 1. 2.3 2.1

Total u~1 °57 T -. 3 7.3 B

E. Unallocable ExpenditurePu,blic Buildings

Residential 0.6 0.8 1.1 1.3 1.4 1,3T-R ~esd-ent-i a. C .n n.7 n.7 1.n 0

~ IL u 1v-L -

Ministry of worksunaloae1. 1.1.1.1.1.

Other unallocableex p en di t ure . . . . .

Total 2.7 3.ž 3T, 26 ~~3

F, Contribution toEmergency Fund 14.0 7.5 .3 1.7 1.6

GRAND TOTAL 47.1 U6.3 7i~7 U7-~ . .7

WUrJe Quarterly~ Iconomic and Statistical Bulletins (data rearranged

Table 19

Government Expenditure _7

(a) Current Expenditure A million

Actual Estimate955756/~ 19500/739 19,6 -

A. General GovernmentDefence 1.3 1.9 1.6 1. 1. .Revenue Collection andFinancial Control 0 0.8' 1.0 1.1 1.1 1.2

Other 6.8 8.3 9.3 10.2 10.2 11.1Total 011) 11.9 T7 LZ.7 Iz.7

B. Social ServicesEducation 3.8 1.6 5.2 5.8 6.2 7.0Health 1.7 1.9 2.1 2.2 2.2 2.4Labour 0.2 0.3 0.3 0.3 0.3 0.3Community Development 0.1 0.1 0.1 0.1 0.1 0.1Water works 0.4 0.6 0.7 0.6 0.6 0.9

Total 6.2 7.5 7.7 9.0 9.5 10.7

C. Economic ServicesAgriculture 1.8 1.6 1.9 2.3 1.9 2.2Veterinary 0.6 0.6 0.7 0.8 0.8 0.9Forestry 0.3 0.4 0.4 0.4 0.4 0.6Game, Fisheries and

National Parks 0.2 0.2 0.2 0.2 0.2 0.2Lands, Mines, Survey

and Geology 0.3 0.3 0.4 O. 0. 0.6Commerce and Industry 0.3 0.3 0.3 0.2 0.2 0.2Roads 1.2 1.5 1.4 1.5 1.6 1.7fther Transport 0.2 0.1 0.2 0.4 0.3 0.h

Total

0. Recurrent FinancialObligations

Public Debt 1.8 2.1 2.5 2.7 2.9 3.4Pensions & Gratuities 1.0 1.3 1.b 1.L 1.8 1.5Passages 0.4 0.5 0.7 0.7 0.6 0.8Transfer to local

authorities 0.8 1.0 1.2 1.L 1.3 1.5Total 7-0 7 7 Z 67.2

E. Unallocable ExpenditurePublic BuildingsResidential 0.4 0.5 0.7 0.L 0.0Non-RPidPntiPl 0.5 0.5 0.6 0-7 0.7 0o

Ministry of Worksiinqll bn'hli 0.8 0.7 1__ 1-1 1-1 1-n

Other unallocable 0.3 0.4 0.2 0.3 0.3 0.3

F. F17ontributio.n5 toEmergency Fund 14.0 7.5 L,-3 1.7 1.6

tPlD rPTOAL)r 1n T f = 5 1 ,)7

Table 19 (Cont.)(b) Dvelonment E_.xrrditurp

Actual Estim-pate(194E7T/AIA/7 1947/GH 1948/ 9 19Q9/n 10/L777r-, 7~ q T I c) q~ 7, 7 1~ Q ,781Q- i9__ 5,(

A. General Governmentef'encn n9 n.9 n9 n9 n1 n 1

Revenue Collection andF ii na I i r-- 1.l - ---

Other 0.8 0.9 0.6 0.5 0.6 1.3, W-L J_. %J '.1 .. *4

nJ C±i 4 - 1 -_4C

Education 0.9 0.8 0.7 0.5 0.8 C.9

LabourGcnmuruity Devel.upirent - - vAv -

Water works 0.b 0.6 0.3 2.5 0.C C.3Total. .J 17 ). .,JC

C. Economic ServicesAgriculture 1.9 2.4 1.0 1.7 1.6 1.5Veterinary v30 .3 0.3 .). L 0.v. vForestry - 0.1 0.1 - - 0.1Game, Fisheries and

National Parks - - - - - 0.1

Lands, Mines, Surveyand Geology - - - --

Commerce and industry 0.2 0.1 0.1 - - -

Roads 0.8 0.6 0.6 0.7 1.0 1.1Other Transport 0.3 0.5 0.9 0.2 0.2 0.5

Total 3.5 7.0 3.0 3.3 3.7

D. Re-current FinancialObligations

Fublic Debt - - - - -

Pensions & GratuitiesPassages - - -

Transfer to localauthorities 0.1 0.5 0.1 0.1 1.0 0.9

Total 0.1 0.5 0.1 0.1 1.0 0.9

E. Unallocable ExnenditurePublic BuildingsResidential 0.2 0.2 0.4 0.9 1.0 0.9Non-Residential 0.1 0.1 0.1 0.1 0.3 0.1

Ministry of Worksunallocable 0.5 0.6 0.2 0.2 0.2 0.1

Other unallocable 0.1 0.1 0.1 - - -

Total 0.9 1.0 0. 1.1 1. 1.1

F.. Contribution toamergency Fund - - - - -

7.1 8.3 6.0 8.2 8.1 8.7

Sou2ce: Quarterly Economic and Statistical Bulletins (data rearranged).

Table 20

Public Debt of Kenya Government-th million)

J une 3 01954 1955 195( 1997 1950 1959 1960

Funded DebtLong-term Loans raised

in London 1/ 28.3 28.3 32.6 32.5 32.5 32.5 32.5Long-term Loans raisedin East Africa 3.5 305 6.0 8.5 10.8 14.6 16.3

Total 1/ 31.8 31.8 38.6 41.0 43.3 h7.0 48.8

Unfunded DebtC. D. & W. 0.2 0.2 0.2 0.2 - - -

"Emergency" Loan - 3.0 3.0 3.0 4.5 5.3 6.1Other 2/ Debt outside

East Africa - 0.9 2.2 2.9 3.6 3.6 5.9Other 3/ Debt within

East Africa 1.0 3.1 3.1 3.1 3.1 3.1 2.1

Total 1.2 7.2 8.5 9.2 11.2 11.9 10j.1- --

Total Public Debt of Kenyan-vrnmPnt, 33.0 39.0 07.1 50.2 5L.5 59.0 62,9

Sinking FundsMarket vaiie of qinkina fii 2-0 2.3 2.8 2.8 3.3 L.0 L.3Supplementary sinking funds 0.5 0.4 0.4 01.4 0.5 0.4 0,h

Total Sinking Funds 2.5 2.7 3.2 3.2 3.7 h. 4o7

1/ Includes L6.7 raised for the East African Railways and Harbours Administration,

2/ Includes loans from the Colonial Development Corporation and the Joint

y L1ULLLUt:; -LVc111D .i I U111 U1V L,U MUhI %,C. aUC L LI A "C LOW.~ 3 ~ '"s U

East African Railways and Habours Administration.

Source: East African Statistical Department.

Table 21

Post War Development Plans(L million)

1946 - 53 1954 - 57 1957 - 60 1960 - 63Total Total Revised Estimates

Expenditure Expenditure Estimates(8 years) (3 1/2 T3 years) (3 years

years)Economic Services

1. Communications(a) Roads 4.3 2.9 2.3 3.5(b) Airfields 0.L 1.4 1.2 0.6(c) P.T.T. 0.3 0.3 0.1 -

2. Agriculture(a) Agricultural & Veterinary

Services 6.5 2.1 ) )(b) Land Bank (Develonment Loans) - 1.4 V Y -

(c) Swynnerton Plan - 5.1 ) )

(d1) Storge & Stocres - 0e2)(e) Forestry, Game & Fisheries 0.5 0.4 0.4 1.3

3. Industry & Mining 0.1 0.5 0.2 0.3

1. Water works and irrigation 1.6 5.3 4.9 1.7

5. Local Government 1.0 3.0 0.6 3.1

6. Public works (share) - 0.6 0.L

Total Economic Services 14.8 23.4 17.4 18.3

D. Social ServicesBrodc1asing - - 0,L4 -

Education 5.0 3.2 2A1 2.3Health 1.0 AeL 0o ve7African Housing 0.5 1.4 1.6 1.2Staff Housing 2.5 0.8 0.8 1.1Other Social (Community Develop-

mn)0.1 0.2 0.1 0.1Public Works (share) - 0.4 0.3

Total Social Services 9.0 7.4 6.4 5.0

C. Internal Security & Defence 1.2 2.9 1.6 1.4Public Works (share) - 0.2 0,2 *

D. General Administration 1.1 1.2 1.7 )2.6Public Works (share) - 0.4 0.3 )

Unallocated (Sup2lies & Transport) - 0.3 0.3 -Total 26.0 35.5 20.1 27.4

T Included under "D".Source: Fast African Statistical Department.

Table 99

Forecast of Available Funds for

(T million)

-rtgage Finance 0.

uganaa Loan .or Secondary Education 0.

±.inw Loan for African Agricultureand Roads 2.0

Colonial Development and Welfare Grants L.7

Motor-car Advances Fund 0.5

Mombasa Water Supply Renewals Fund 0.1

Transfer from Colony Revenue forPublic Works non-recurrent 1.0

Fees from beneficiaries of variouspublic services 0.9

Capital Gap to be filled from possiblesources of external finance 7.35

Total 27.4

Excluding about b 1.5 million expected from the U.7. for theResettlement Project.Excluding about L 0.4 million likely to be available for theResettlement Project

Source: Mission's own estimates on the basis of information re-ceived from the Treasury.

Table 23

External and Interterritorial Trade(r i"illion)

Q)A i 1qtý i 1957 i98 1959 96

External1 Trade~

Imot*67 1).2 3.1 '71. 72. 6n .4n.5ic, 7n.I~f which:

Commercial (3.9) (13.0) (28.0) (57.h) (60.9) (5. 7 (57.7) (65 .)Government (0.8) (1.2) (6.1) (14.1) (7.1) ( .5) (3.8) (5.1)

Exports 1.0 7.6 20.7 28.1 31.2 33.2 38.h 610.2

Domestic Exports (3.6) (6.3) (17.2) (25.7) (26.3) (29.3) (33.3) (35.2ýRLe-exports (k.V ) 1 .3 - )3.5)J k*; k* (2j (k9 (3.9 (57 (5.l0-L) 1

rn. _n. 17 _n. I -In

Trade ba-lance -v.7 -u.6 -L. -3. -l4. -2. -23.c -29.

2iiteruerritorial T- rade

Inports from: ri.a. n.a. 3-4 6.0 1.5 7.0Tanganyika n.a. n.a. (0.~7) (T~ž) (l~;5) (15) (T.9) (1~-)Uganda n.a. n.a. (2.7) (.8) (3.0) (3.9) (3.6) (5.1)

Exports to: n.a. n.a. 3.6 6.0 11.4 12.9 12.3 13.8Tanganyika n.a. n.a. (T~ž.2) (2~)T(~T -6.7) 6.5) T7-~)Uganda n.a. n.a. (2.b) (3.5) (6.0) (6.2) (5.8) (6.2)

alance of inter-territorial trade +0.2 - +6.9 +7.5 +6.8 +6.8

Total Trade Balance -0.7 -6.6 -13.2 -43.4 -33.9 -20.1 -16,3 -23.1

* Net Imports i.e. excluding imports made in Kenya for requirements of otherEast African territories.

Seurce: Statistical Abstract, 1958, and data received from the Government.

Table 24-a

Domestic Exports*(by quantity)

Thousands

Commodity Unit 1938 1946 1950 1955 1957 1958 1959 1960

Coffee (not roasted) Cwt. 339 192 205 388 445 500 517 556Sisal Fibre and Tow Ton 28 24 36 34 40 42 51 57Tea Cwt. 84 80 83 116 144 163 188 21hCotton (Raw) 100 lb. 49 6 29 52 31 49 71 78Maize (unmilled) Cwt. - 318 617 1,543 452 1,957 1,086 184Oilseeds and Nuts Ton - 0.2 1 8 8 11 12 11Pvrethrnm Flowers Cwt. - 1)19 23 19 35 36 21 63Meal and Flour of Wheat - 146 126 15 2 3 1 10Wnttln Brk ExYtrPnt - 219 183 66 26 380 38 )j :285Hides and Skins - - 117 100 113 86 109 133T!mhpr Cu. Ft. 191 237 QNL 89 Th0 213 17)1 ?10

Sodium Carbonate Ton 29 78 101 117 116 104 1l8 115("ol O Troy 87 145 31 12 7 8 9 9

(1950=100)

Commodity 1938 1946 1950 1955 1957 1958 1959 1960

Coffee (not roasted) 165 9L 100 192 224 251 252 276QZA -_- .- anA 'Pow 7A A7 100 O 11A 110 -L'1 Co

Tea 101 96 100 140 174 197 227 258r--.-a,- 4n0 nI -nn n~77 -Il 4f 041 ) .r' *1-7r

-LU7UJi CJLdV .10-L -LUU C- I I LU;; r LU L C14 9) - %

Mai-*-e (unmilled) - 56 100 249 73 316 176 30u.L m ""rethrui X'-Lwers U - u1o ±V U.L y)J. ) iQU 7± I e

Pyrethrum Extract - 37 100 304 191 h28 618 660wjab Le narK rxtract - "y iuu .) U Luy I > oU yHides and Skins - - 100 68 80 56 93 113UVouu aliU m.LIUL)er - -%U Ju L4 CU ev CLL4G-ld 281 145 100 40 24 25 30 28U. "um. Carbonate 29 77 100 1160 1160 103 114 111

Excluding exports of Kerya products to Tanganyika and Uganda.Source: Annual Trade Reports and East African Statistical Department.

Table 24-b

Domestic Exports*(L million)

1938 19L6 1950 1955 1957 1958 1959 1960

Coffee (not roasted) 0.8 1.0 3.6 8.9 10.8 10.4 10.6 10.3Sisal Fibre and Tow 0.4 0.8 4.1 2.0 2.1 2.3 3.5 1.6Tea 0.5 0.5 1.3 2.8 2.8 3.2 3.6 L.LCotton (Raw) 0.1 - 0.2 0.7 0.4 0.5 0.7 0.8Maize (Urnmilled) 0.3 0.2 0.7 1.7 0.5 1.9 1.1 0.2Oilseeds and Nuts - - 0.1 0.3 0.5 0.5 0.6 0.6Pvrathrnim Flwprs 0.2 1.2* 0.3 0.3 0.q 0.4 0.3 1.0Meal and Flour of Wheat - 0.2 0.2 - - - - -

k RqrL-.t tV Erint. 0.1 0- 1.0 2- 1.4 1.0 1-0 0.7

Hides and Skins 0.2 0.4 1.9 1.3 1.5 1.0 1.6 1.8Ti minr - 0.1 0.5 - 0m1 0M 01 0.1Sodium Carbonate 0.1 0.4 0.9 1.3 1.3 1.2 1.7 1.2Gold 0. 0.3 0n_ 0'1 0. ni 1 0_1 0-1 n_1Other 0.4 1.0 2.0 L.0 L.3 6.6 8.L 9.4

Total 3.6 6.3 17.2 25.7 26.4 29.3 33.3 35.2

.7-)u -L714U _L7.;" J47)97 ±L f .L7) .L ~ uU

Sisal Fibre and Tow 12.1 13.6 23.6 7.6 7.9 7.6 10.14 13.0Tea 13.9 8.5 7.8U 10.80 10.9 110 10. 12.5 eCotton (Raw) 2.9 0.7 1.3 2.7 1.! 1.8 2.0 2.1Maize (Unmilled) 7.2 2.5 o. 6. .1.0 0.b 3.3 0.5-ilseeds and Nuts - 0.4 0.8 1.2 1.9 1.7 1.7 1.6

Pyrethrum Flowers .0 18.3 1.9 1.1 1.9 1.0 1.0 2,9Meal and Flour of Wheat 1.2 2.8 1.3 0.1 - - - -Wattle Bark Extract 2. e.u 5.7 8.8 >8 >. 3.1 .Hides and Skins 5.2 5.9 11.3 5.1 5.6 3.5 4.9 5.0Timber 0.9 1.3 2.8 0.2 u.3 0.4 0.2 0,3Sodium Carbonate 3.7 6.7 5.0 5.0 5.1 h.1 5.2 3.7Gold 1)4.5 14.3 2.1 0.5 0.3 0.3 0.3 0.~3Other 9.8 16.1 11.5 15.7 16.2 22.4 25.3 26.5

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Excluding exports of Kenya products to Tanganrika and Uganda.-* Including "Pyrethrum Extract" which in other years is included in the "other"

item.

Source: Annual Trade Reports.

Table 25

Retained Imports*(1, Million)

1953 1955 1957 1958 1959 1960

Food 4.3 3.2 5.1 4.0 4.9 3.6

Beverages and Tobacco 1.0 1.0 0.9 0.9 0.8 0.8

Crude Materials (inedible)Except Fuels - 0.1 0.3 - - -0.1

Mineral Fuels, Lubricants, etc. 4.6 6.7 7.0 6.6 5.9 6.4

Animal and Vegetable oils andFats 0.1 0.2 0.6 0.4 0.3 0.5

Chemicals 2.0 3.6 1.3 L.2 1.3 5.1

Manufantiirpd Goods ClassifidChiefly by Material 16.9 21.1 22.1 18.9 17.7 21.1

Machinery and Transport Equip-ment 12.8 21.2 18.2 11.6 1.9 19.),

Articles 2.6 3.6 4.7 4.1 L.5 b.9

Other 4.0 6.5 4.5 L.2 3.1 3.3

Total 18.3 69.2 67.1 56.9 56.4 65.0

14e import I~.L ILLILO 1-:;:AjJUI'U03 UAU.LUL"LIIg LI[IjJU'U, LUl. CIrUi-r UI- u6ciilue

products.

Source: Annual Trade Reports and East African Statistical Department.

lauwLe Afu-a

Kenyals Balance of Payments, ly>9o(b million)

Current items Receipts Payments Net Debit

ierchandise 31.6 .6 29.0Non-monetary Gold 0.1 - Cr. 0.1Foreign Travel 3.7 3.8 0.1Transportation 3.5 2.8 Cr. 0.7Insurance 5.4 8.2 2.8International Investment Income 2.6 8.6 6.0Public Transactions(a) U.K. Forces 2.5 2.3 Cr. 0.2(b) Other 0.6 1.0 0.4

Miscellaneous Services 1.0 1.9 0.9Donations 0.6 0.8 0.2

Total 38.4

Capital Items Liabilities Assets Net Credit

Official Grants 1.6Long-term Private Capital

Transactions 6.0 2.0 1.0Short-term Private CaPitalTransactions 0.1 - 0.1

Long-term Public CapitalTransactions 1.3 Cr.O.b 1.7

Short-term Public CapitalTransactions 0.3

Caital Transactions of East AfricaCurrency Board and Conuercial Banks (net) Dr. h.0

Total 3.7

Errors and Omissions 3h.7

* Preliminary estimates.

Source: East African Statistical Deoartment.

Table 26-b

East African Territories' Balance of Payments, 1958"(E million)

Current Items Receipts Payments Net Debit

Merchandise 120.8 121.1 0.3Non-monetary Gold 0.8 - Cr. 0.8Foreign Travel 5.2 6.9 1.7Transportation 5.1 5.8 0.7Insurance 6.7 10.2 3.5International Investment Income 6.3 13.3 7.0Public Transactions

(a) U.K. Forces 2.7 2.3 Cr. 0.6(b) Other 0.9 3.0 2.1

Miscellaneous Services 1.5 4,6 3.1Donations 1.4 2.2 0.8

Total TB.

Capital Items Liabilities Assets Net Credit

Official Grants 2.9Long-term Private Capital

Transactions 12.0 2.0 10.0Short-term Private Capital

Transntions 0.7 0.1 0.6Long-term Public Capital

Short-term Public Capital

Capital Transactions of East AfricaCur ,recyi Bord a n,v Co-Mrci-al

Banks (net) Dr. 0.8

Total 20.1

Errors and Omissions 2.1

* Preliminary estimates, including Kenya, Uganda and TanganyikaLd~U. . .LiastU ~ ZIdL ± rj_U.L JL C4L). -4-4 4-4 -1 T

Table 27

Sterling Assets*

ý= million)

Nominal Value Market ValueInvest- Sinking Liquid Total Invest- Sinking Liqud Totnlments Funds Assets ments Funds Assets

_____ _____ (N\et) ____ _____ _____ (Net)

(a) Kenya Govern-ment

June 30, 195 7.4 2.5 4.h 14.3 7.7 2.5 4.4 14.6December 31, 195l 7 .5 2.6 3.3 13.June 30, 1955 7.2 2.8 1.7 11.7 6.8 2.7 1.7 11.2D e cem b e r 31 1955 7.3 3.0 0.5 in.8PJune 30, 1956 7.4 3.3 0.6 11.3 6.8 2.8 0.7 10.3

'n i n r-' r~ nr' -i r' -i nDie c em-LGjer -31, 1956ý> u. 3. 5 0.June 30, 1957 5.8 3.8 - 9.6 5.3 3.2 0.1 8.1DjecTemr 31, inr9" r I -.1 r . .

June 30, 1958 5.h 4.h Dr. 0.3 9.5 L.5 3.6 Dr. 0.3 7ý8Decem-ber 31, 1958 5.7 U.8 Dr. 1.2 9June 30, 1959 6,2 ,6 Dr. 1.5 9.4 5.3 3.8 Dr. 1.5 7.7December 31, 1959 5.3 5.6 0.3 11.2

June 30, 1960 5.9 5.6 0,8 12.3 4.8 4.2 0.8 918

(b) Local Authorities& Statutory BoardsDecember 31, 1954 0.1

" 1955 0.9i ? 1956 1.1i " 1957 1.2"i "l 1958 1.k

1959 1.51960 1.5

(c) Currency Board(Kera share)June 30, 1954 17.3

1955 19.4" 1956 15.5i" 1957 19.1

1958 16.5" 1959 16.7

t " 1960 15.7

(d) Post Office SavingsBankDecember 31, 195h 9.2

" " 1955 10.1" l 1956 9.9

" 1957 8.6S " 1.958 7.1i " 1959 7.2

June 30, 1960 6.6

vised data iJch incl,Ude assets owned by the PD.O . SaingS Bank,and KCeny

companies.

Table 27 (Cont.)

TotalSterling Assets(nominal value)

(e) Commercial BanksTecember 31, 19Šik 16 9

" " 1955 10,2"t " 95 8.3

1957 3.7R. 7

tt 1959 8."1n( " 190 6.

(.p) nvereas Asset-s o+' Kenya

companiesDnecember 31, 96 10.6u_LJ

" " 1957 7.7

" " 1959 9,o

Jource: Quarterly Economic and Statistical Bulletin andt data receivedt fron theEast African Statistical Department.

Table 28

World Prices for Kenyats Major Export Commodities

$ per 100 lbs. shillings per lb, L per ton

1938 1/0.35 17.5

1947 72.3

1950 53.5 139,3

1951 58.8 3/3.05 229.8

1952 57.1 1/11.54 158.5

1953 60.0 3/3.56 93.2

1954 80.0 5/0.10 86.8

1955 64.4 3/8.64 80.3

1956 74.0 3/6.55 78.5

1957 63.9 3/5.24 71.8

1958 52.3 3/10.48 72.2

1959 45.7 3/10.92 100.0

1960 45.13 4/2.27 102.1

1961 43,88 (July) b/2c,10 95.0 (June)

1/ Colombia, Medellin in New York (1938-59),Colombians, Manizales and Medellin (1960-61).

2/ U.K., annual average prices at London auctions for East African tea(1938-51. 1960-1961) or Kenya tea (1952-59).

3/ East Africa No.1, C.I.F. European ports.

Source: International Tea Committee Bulletin and IBRD Economic Staff.