Since independence was achieved in 1963, Kenya’s economy has contained both privately owned and state-run enterprises. Most of the country’s business is in private hands (with a large amount of foreign investment), but the government also shapes the country’s economic development through various regulatory powers and “parastatals,” or enterprises that it partly or wholly owns. The aim of this policy is to achieve economic growth and stability, generate employment, and maximize foreign earnings by achieving high levels of agricultural exports while substituting domestically produced goods for those that have been imported. For a decade after independence this policy showed great promise as rising wages, employment, and government revenue provided the means for expanding health services, education, transportation, and communication. But problems that arose with the rise of global oil prices in 1973 have been aggravated by periodic drought and accelerating population growth, and Kenya’s economy has been unable to maintain a favourable balance of trade while addressing the problems of chronic poverty and growing unemployment. The country’s ability to industrialize has been hampered by, among other factors, limited domestic purchasing power, shrinking government budgets, increased external and internal debt, poor infrastructure, and massive governmental corruption and mismanagement.
In an effort to decrease its dependence on volatile agricultural markets, Kenya attempted to diversify its exports in the last decade of the 20th century, adding horticultural products, clothing, cement, soda ash, and fluorspar. The country also made the export of manufactured goods such as paper and vehicles a priority. Domestic restrictions on imports have been removed slowly, however, and this policy has been only partially successful. Kenya’s economy, which did not grow at a constant rate during the last two decades of the 20th century, continued to be dominated by the external market; tourism and agricultural exports were still the major source of foreign exchange for the country in the early 21st century.