How the US Financial Crisis Might Affect Kenya

The fallout of the US financial crisis has already spread to Europe's banks, and developing countries like Kenya also speculate on how the crisis could affect their welfare. Reporting for Kenya's Business Daily, Ochieng Rapuro and Jenny Luesby note that the nation’s banking sector is mostly insulated from foreign finance. In Kenya, concern centers on the increasingly likely chance that the US and Europe are entering a recession. Kenyans rely on strong US and European economies for tourism, remittances and exports of Kenyan goods. For example, US, Canada and Europe provide 75 percent of Kenya's tourists for an industry that provides the backbone for the nation’s foreign exchange earnings. Likewise, the decline in wealth and a spending crunch will lower foreign demand and consumption of Kenyan flowers and tea. Finally, amidst financial uncertainty, Western donor nations might scale back large aid commitments, deepening challenges developing nations' populations already stretched thin by high food and petroleum prices. In this sense, Kenya is a troubling model for the financial crisis's effects in the developing world, as many countries depend on the large markets of the West for export growth and foreign aid to sustain impoverished populations. – YaleGlobal