Agriculture remains the backbone of the Kenyan economy. It is the single mostimportant sector in the economy, contributing approximately 25% of the GDP, andemploying 75% of the national labour force (Republic of Kenya 2005). Over 80% of theKenyan population live in the rural areas and derive their livelihoods, directly orindirectly from agriculture.

Given its importance, the performance of the sector istherefore reflected in the performance of the whole economy. The development ofagriculture is also important for poverty reduction since most of the vulnerable groupslike pastoralists, the landless, and subsistence farmers, also depend on agriculture as theirmain source of livelihoods. Growth in the sector is therefore expected to have a greaterimpact on a larger section of the population than any other sector. The development of thesector is therefore important for the development of the economy as a whole.

The importance of the sector in the economy is reflected in the relationship between itsperformance and that of the key indicators like GDP and employment. Trends in thegrowth rates for agriculture, GDP and employment, show that the declining trendexperienced in the sector’s growth especially in the 1990s, is reflected in the declines inemployment and GDP as a whole.

Policies that affect the performance of the sector have important implications for the economy.Policies for agriculture consist of government decisions that influence the level and stability of input and output prices, public investments affecting agricultural production, costs and revenues and allocation of resources. These policies affect agriculture either directly or indirectly. Improved agricultural production has been seen as one of the overall objectives for poverty reduction in the country.

The objectives of agricultural sector strategy have been increasing agricultural growth,seen as important for increasing rural incomes and ensuring equitable distribution. Due to limited availability of high potential land, it has been envisaged that increasing agricultural production will have to come from intensification of production through increased use of improved inputs, diversification especially from low to high valuecrops, commercialisation of smallholder agriculture, and increased value addition through stronger linkages with other sectors.

In the following sections, we review some of the key policy issues and concerns with respect to the sector’s development.