The impacts of Russia's invasion of Ukraine on the Kenyan economy: Evidence from an economy-wide model

Abstract

Russia's invasion of Ukraine has disrupted the global supply chains of several globally traded commodities. The repercussions for many African countries are concerning. This study assesses the impact of Russia's invasion of Ukraine on the Kenyan economy using a computable general equilibrium model. The model is calibrated using a highly disaggregated social accounting matrix. The analysis particularly focuses on the impacts of changes in world prices for five major commodities of which Kenya is a net importer. The results show rising import price that adversely lowers Kenya's gross domestic product and household consumption. The macroeconomic impacts are particularly driven by the fertilizer and fuel commodity price changes. Activities producing agrifood commodities and providing services are highly affected. Rural households face a higher food consumer price index than their urban counterparts. Subsidizing fuel and fertilizer prices could dampen most of the adverse effects but would come at considerable fiscal costs. The government of Kenya should consider devising policies that strengthen intraregional trade, diversify import origins and improve agricultural productivity and energy efficiency.