Savings And Investment

In past years Kenya has not invested much into capital to prepare for the future. However the effects of not investing are catching up to Kenya. As a result Kenya is now trying to invest in capital for the future. According to the Central Bank of Kenya’s website, the governor of the Central Bank of Kenya recently discussed that Kenya needs to invest in technological capital. However Kenya has not yet had time to implement any policies either to raise moeny for capital or to give people incentive to invest their own money (Central Bank of Kenya, 2009). The Kenyan government, as well as governments worldwide, is slowly realizing that Kenya’s economy needs help. Kenya’s population is growing faster than its economy is growing (JamboKenya, 2009). Because of this the government must act fast to prepare for the future before Kenya obtains even more debt.
The Kenyan government is trying to generate more revenue by creating more and more businesses (JamboKenya, 2009). The government invests money into these businesses so that they will both create jobs for people and increases Kenya’s revenue in the present and in the future. The government hopes these enterprises will be a good investment that will consistently generate money for Kenya for many years. Foreign countries are also helping Kenya’s economy grow by investing in Kenya through foreign direct investments (JamboKenya, 2009).
However Kenya’s economy is having difficulties growing because even though the Kenyan government is investing into capital they are not saving to invest this money. They are getting the money through loans from other countries (JumboKenya, 2009). Kenya is still importing goods several mechanical and electronic goods even though they have a myriad of natural resources (CIA, 2009). Essentially Kenya is using money it does not have in order to create businesses. These businesses will have a difficult time becoming successful when they begin in a country that is in a major debt. Since these businesses have spent so much more money than the initial allotment, it will take several years to repay their debts before the businesses can begin making a profit.
Since the Kenyan government is investing in all of these businesses given the current economic state of Kenya in the short run the economy might continue to suffer. However, in the long run these firms could eventually be able to recover from all of the money they are costing in the short run. These businesses will create jobs for countless people as well as increase productivity. Thus after these firms are able to overcome their large debts the Kenyan economy should be much better off. Perhaps after these enterprises are able to overcome the debt they will be able to help the economy because they will eventually begin making a profit.
They can then save their profits in order to invest in even more businesses later which will help the Kenyan economy grow. When these companies save their money in the banks, it will help to shift the supply curve right, lowering interest rates so even more people can take out loans in order to purchase capital for investments for the future. Conversely, it is plausible that the Kenyan government will gain too much power and become an unbreakable market power. Overall the new businesses the Kenyan government is creating may or may not help the economy.

References:

JamboKenya. "Kenya Economy." JamboKenya. N.p., 2009. Web. 24 Nov. 2009. http://www.jambokenya.com/jambo/kenya/econ01.htm.

Central Bank of Kenya. "About Us." Central Bank of Kenya. N.p., 2009. Web. 1 Dec. 2009. http://www.centralbank.go.ke/.

CIA. "Kenya Economy." CIA Worls Factbook. CIA, Nov. 2009. Web. 18 Nov. 2009.