Policy Brief No. 13 of 2017-2018 on The Impact of Drought on Key Macroeconomic Variables

Abstract

Adverse weather conditions have become more prevalent all over the world, and with devastating impacts on economies. In Kenya, adverse weather conditions are manifested in the frequent occurrence of droughts and floods, and while droughts are widespread throughout the country, floods tend to be localized. Data obtained from Climate Hazards Group InfraRed Precipitation with Stations (CHIRPS) shows that there has been an increase in the frequency of occurrence of drought months in Kenya, ranging from mild to extreme drought. The economic effects of droughts and floods are manifested in the disruption of production flows resulting in production losses, income losses, loss of employment, and increased operational costs. These effects are compounded by lack of and/or inadequate infrastructure development such as storage facilities that can absorb surpluses during bumper harvests. However, droughts and floods do not occur in isolation, and at times they occur in presence of other events that have effects on economic systems, including political instability, high international commodity prices, and global downturns, among others...