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Free Trade and Economic Development in Kenya Report

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Updated: Feb 26th, 2021

Introduction

The Kenyan economy is making an upward move after an economic basin in 2011 (The World Bank 3). According to recent statistics, the Kenyan economy recorded a 5 percent economic growth in 2012. The country’s economy is stabilizing due to a number of reasons.

These include a drop in interest rates, an increase in tourism, and a reduction in inflation. The prudent approach to stabilizing the economy is good news for international trade, especially with the bordering countries (Zepeda 1). In the past decade, Kenya’s imports have recorded a steady increase as opposed to exports. This shows that the balance of trade for the country is not in its favor. To enhance the balance of trade, there is a need to make various changes to the trade barriers.

Analysis

The initiation of free interregional trade would be a prudent approach in stabilizing the Kenyan economy. To begin with, with a free interregional trade, the Kenyan economy stands to benefit. For instance, Kenya is a country that extensively depends on agriculture as an economic activity. Most Kenyans are involved in agriculture, which is a source of income for many families. However, most of the produce lacks a ready market.

This increases the losses incurred by these farmers, especially when dealing with perishable produce. However, with the enhancement of interregional trade, the market for these products will swell. This will give the farmers and people involved in agriculture an opportunity to sell their products over the borders. With a broader and ready market, the farmers and other producers will have an upper hand in making greater progress. As such, there will be a reduction in the losses incurred by the people involved in farming and agriculture.

The value of products and services increases when they are transported from one place to another. Apparently, the enhanced transport and infrastructure in Kenya is an encouragement to interregional trade between Kenya and its neighboring countries (Winston and Castellanos 1). As a result, the farmers will feel the importance of free trade, when they garner higher income from their occupation. This will enhance the economy of Kenya, as it will have a greater exchange of products to other countries. As a fact, this will be a relief to the Kenyan economy, as the balance of trade will improve.

According to the money exchange markets, the Kenyan shilling is relatively stronger when compared to the neighboring countries. Therefore, this will be an advantage to the Kenyan economy, as the superiority of the shilling will lead to better economic growth. In such instance, the farmers and producers will have a better bargain in the markets, as they will be trading goods at a higher rate when compared to a single market, where the shilling is standard. In addition to this, it is noted that the tax rates on the borders discourage people to indulge in trade.

For instance, when taxes are levied on the product, the farmers have to impose the costs on the consumers. This heightens the pricing of the products, which makes it hard to trade. Economically, when the prices of a commodity increase, the consumers will have to reduce the consumption rate. Therefore, when the taxes are retracted, the prices of the product will be stable. As such, consumers will have a higher amount of disposable income to spend on produce. As such, they will increase their consumption rate, since the pricing has reduced, when compared to the past.

Conclusion

In conclusion, the free interregional trade will be a prudent approach in ensuring Kenya has a great deal in enhancing the growth of the economy. The producers in the country are likely to exploit the new markets, which will lead to growth in the sale of produce. This will enhance the balance of trade, as the country will have increased the quantity of produce leaving the country. Therefore, it is prudent to enhance the free trade between Kenya and the neighboring countries.

Works Cited

The World Bank, Kenya Economic Update: Walking on a Tightrope. Rebalancing Kenya’s economy with a special focus on regional integration. 2012. Web.

Winston, Shelley and Carolina Castellanos. “Trade in East Africa.” Finance and Development 48.4 (2011): 56. Print.

Zepeda, Eduardo. The Doha Round and Kenya: Good and Not So Good Lessons. Brazil: International Policy Centre for Inclusive Growth. 2010. Print.

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IvyPanda. (2021, February 26). Free Trade and Economic Development in Kenya. Retrieved from https://ivypanda.com/essays/free-trade-and-economic-development-in-kenya/

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1. IvyPanda. "Free Trade and Economic Development in Kenya." February 26, 2021. https://ivypanda.com/essays/free-trade-and-economic-development-in-kenya/.


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IvyPanda. "Free Trade and Economic Development in Kenya." February 26, 2021. https://ivypanda.com/essays/free-trade-and-economic-development-in-kenya/.

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IvyPanda. 2021. "Free Trade and Economic Development in Kenya." February 26, 2021. https://ivypanda.com/essays/free-trade-and-economic-development-in-kenya/.

References

IvyPanda. (2021) 'Free Trade and Economic Development in Kenya'. 26 February.

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