Recrutement d’un consultant international pour le projet « Fostering Kenya’s Sustainable and Inclusive Growth under Public Debt Constraint », Kenya

REQUEST FOR EXPRESSIONS OF INTEREST

AFRICAN DEVELOPMENT BANK Eastern Africa Regional Development and Business Delivery Office (RDGE) Longonot Road Plot 11, Upper Hill, P.O Box 4861 -00200, Nairobi – Kenya Email: [email protected]

1. The African Development Bank hereby invites International Individual Consultants to indicate their interest in the following assignment: “Fostering Kenya’s Sustainable and Inclusive Growth under Public Debt Constraint”.

1.1  Context and Justification of the study:

Kenya, as many other East African economies, have enjoyed a relatively strong growth momentum over the last decade, growing at an average of 5.8% between 2009 and 2019. However, growth remained lower than Vision 2030’s target of 10% per annum and that of Third Medium-term (MTP-III) growth target of 7%. The growth has been supported by human and physical capital accounting for 65% and 20% of the growth respectively on the supply side. Productivity, measured by total factor productivity, also grew at slower pace of about 0.8% per annum compared to the 2.5% growth envisaged in Vison 2030 for a rapid and efficiency led growth. On the demand side, growth has been largely driven by domestic absorption (domestic demand, private consumption accounted on average for over 79% of the GDP growth while gross fixed capital formation for about 10% of the growth), while external demand dragged growth, contracting by negative 6%. In general, not only was the growth insufficient in size in relation to medium and long-term targets, but also in quality since it could not translate into substantial reduction in poverty, unemployment and income inequality, which are partly attributable to the slow-paced structural change the country has experienced over the decades.

1.2 The domestic demand has been growing partly due to huge public infrastructure investment financed mainly through government borrowing, which has in turn resulted in the significant growth in public debt over the same period, from 41% of GDP in 2013 to 65.5% in 2020. This has partly led to the consistent shrinking of the fiscal space in the country, raising concerns on the sustainability of both the robust growth momentum and debt situation. Covid-19 has worsened the situation. The constrained fiscal space that Kenya (an indeed many other developing countries) currently faces, is characterized by heightening public debt levels and dwindling government revenues exacerbated by COVID-19 pandemic. Due to the pandemic, Kenya’s economy grew by just 0.6% in 2020 against the pre-COVID projection of 6.1%, about 0.2 million people slid into extreme poverty, and thousands of jobs were lost, while public debt rose by over 6 percentage points in just 6 months to about 72% of GDP by the end of 2020.

1.3  Consequently, Kenyan authorities must devise strategies and policies that will place the economy on the recovery path and promote and sustain inclusive growth. This study will therefore seek to investigate the emerging macroeconomic issues in the country and shed light on what need to be done so as to ensure sustainable and inclusive growth, and to respond to the rising concerns about debt sustainability in Kenya which is partly driven by the adverse effects of COVID-19 on domestic revenues amid rising public expenditures to mitigate the impacts of the pandemic. It will further seek to review the public debt trends and forecasts to establish an optimal debt path for accelerated economic recovery and sustainable and inclusive growth.

1.4 The specific objectives of this ESW are: (i) determine the public dept path that is supportive sustainable and inclusive growth; (ii) undertake factor productivity analysis and growth accounting for Kenya; (iii) propose policy actions necessary to boost structural transformation in Kenya; (iii) propose policy actions necessary to avoid debt default in the future; and (iv) propose policy actions necessary to avoid middle-income trap (MIT).

1.5  The African Development Bank Group (AfDB), in collaboration with the National Treasury of Kenya, is recruiting an international consultant to carry out this study

2. The assignment:

Under the supervision of the Lead Economist in charge of Kenya, the International Consultant will perform the following tasks:

The Situation, Drivers and implications of Kenya’s Public Debt

• Describe the general development finance issues/constraints of the country
• Take stock of the domestic and external debts (amounts of the past twenty years, composition, concessionality, maturities, costs, etc.°
• Examine the pre-Covid-19 and post-Covid-19 debt issues in Kenya (including the expected post-Covid-19 financing challenges)
• Determine the drivers of external debt e.g. primary balances, exchange rate depreciations; interest rates; governance/institutional factors
• Determine the drivers of domestic debt
• Analyze the sustainability of the external debt and its implications
• Analyze the sustainability of the domestic debt and its implications
• Propose policy options aimed at avoiding debt default
• Determine the critical path of public debt that can ensure sustained and inclusive growth

Analyzing the development dynamics of the country

• Compare real GDP growth rates of Kenya with rates for other African middle-income countries (AMICs) and those for African low-income countries (ALICs) ;
• Provide a growth accounting decomposition since the early 1990s ;
• Identify changes in total factor productivity (TFP), both before and after (if possible) achieving middle-income status ;
• Document and explain changes in the composition of output (agriculture, industry, services), compared to other AMICs and ALICs ;
• Document and explain changes in the composition and degree of diversification of exports, compared to other AMICs and ALICs. If possible, construct an index of export diversification and show its evolution before and after the transition to middle-income status ;
• Document and explain changes in the level and composition of employment (agriculture, industry, services), compared to other AMICs and ALICs. Explain to what extent labor has shifted from low-productivity activities (mainly in subsistence agriculture), to higher-productivity activities ;
• Document and explain changes in access to infrastructure, both “basic” (roads, ports, etc.) and “advanced” (internet, fixed broadband subscriptions), compared to other AMICs and ALICs.
• Document and explain changes in income inequality, compared to other AMICs and ALICs ;
• Using the growth diagnostic methodology, determine the binding development constraints the country faces.

What are the challenges that Kenya faces to boost structural transformation in short to medium terms, and to achieve high-income status in long term ?

• Distinguish between “general” challenges (e.g., further reductions in poverty, reducing maternal mortality, or more generally achieving the SDGs) and challenges that are specific to improving productivity ;
• Role of industrial policy and integration in global value chains ;
• Has the employment elasticity of growth fallen over time?
• Discuss inequality and implications for growth; both income inequality in general, and gender inequality. Has rising inequality created ground for populism?
• Has financial openness proved to be a potential benefit?

Based on assessing these challenges, what strategy should Kenya pursue to boost structural transformation and achieve high-income status?

• Policies aimed at transforming agriculture ;
• Policies aimed at promoting access to advanced infrastructure :
• Investments in human capital (with an emphasis on cognitive skills, rather than years of schooling) ;
• Industrial policy and impact on the structure of production and export diversification. Specific role of agro-industries ;
• Labor market reforms aimed at mitigating skills mismatches ;
• Regional integration and regional value chains ;
• Measures aimed at reducing income equality ;
• Measures aimed at reducing gender equality.

3. Qualifications and Experience:

The consultant must be fluent in English and should have the following qualifications:

•  PhD degree in Economics, Public Finance, Public Policy or related disciplines;
• A minimum of 18 (eighteen) years relevant professional experience, of which at least 10 years is related to similar assignment
• In-depth knowledge and track record on public debt analysis, and growth accounting/diagnostic exercises
• Detailed knowledge and experience on Kenya’s development dynamics
• Outstanding competence in the use of Bank standard software (Word, Excel, Access, PowerPoint) and econometric software such as STATA and Eviews;
• Ability to work in a multi-cultural environment and to build effective working relations with government entities or different stakeholders (colleagues, private sector, Development Finance Institutions, academia, etc.) with ability to multitask and meet tight deadlines.
• Demonstrated experience of data collection, processing, analysis and report writing, and communication; with evidence of similar work done in the past;
• Comprehensive knowledge of MICs

4. Eligibility, deliverables and duration of the assignment:

4.1. The eligibility criteria, the establishment of a shortlist and the selection procedure must comply with the Bank’s rules and procedures for the recruitment of consultants. Please note that the interest expressed by a consultant does not imply any obligation on the part of the Bank to include the consultant in the shortlist.

4.2. The service, under this assignment, will involve consultancy services for a period of three (3) months. Remuneration will be in accordance with Bank rates and the qualification and experience of the consultant. The successful consultant is expected to start the work as soon as the selection process is completed and the contract signed.

4.3. As part of his assignment, the consultant will provide the following deliverables: i) Inception report presenting the conceptual framework, and detailed methodology; ii) Interim Final Report accepted; iii) Final Report reflecting the comments/inputs on the Interim Final Report (max. 45 pages).

4.4. Interested individual consultants can obtain further information at the address below during Bank working hours: 8:00 am to 5:00 pm.

5. Expressions of interest accompanied by an updated Curriculum Vitae (CV) must be received only by email to the addresses provided below no later than July 20, 2021 at 5:00 p.m. (Nairobi time) and specifically mentioning: International Consultant for the “Fostering Kenya’s Sustainable and Inclusive Growth under Public Debt Constraint”.

For the attention of:

Ms. Brenda Wanjira,

African Development Bank

East Africa Regional Development and Business Delivery Office (RDGE)

Khushee Towers Longonot Road Plot 11, Upper Hill

P.O. Box 4861-00200 Nairobi, Kenya

Email: [email protected]

6. Establishment of the shortlist: A shortlist of three to six individual consultants will be established once the expressions of interest and the updated CV have been received. The shortlisted consultants will be evaluated on the following criteria based on their updated CVs. Shortlisted candidates will be invited to send in proposals and comments on the assignment.

in  using  the  relevant  econometric  methods  and  relevant  software,  knowledge  of  Kenya’s