The Kenyan economy resumed positive growth in 2001, with real GDP growth of 1.2 per cent from the negative 0.2 per cent recorded the previous year. The outlook is for Kenya to maintain positive but subdued growth, estimated at 1.6 per cent in 2002 and projected to rise to 2.8 per cent in 2003. The resumption of positive growth in 2001, however, did not reverse the five successive years of decline in income per head. Kenya’s recent poor economic performance has aggravated the unemployment and poverty situations in the country, with growth in wage employment decelerating between 1998 and 2001, the first downturn since independence. The percentage of Kenyans living below the poverty line has also increased since 1997. Kenya’s resumption of positive growth in 2001 was accompanied by a sharp deterioration in the government’s budgetary position following increased government expenditure amidst poor domestic revenue performance that was exacerbated by the continuing withholding of international assistance due to governance related problems. The budgetary position is expected to continue to worsen in 2002 and 2003, with increased expenditure amidst stagnation in revenue…