Economic segments of new law need scrutiny

Friday August 27, 2010 is an historic day for Kenya.

It is when Kenyans will walk into the new constitutional dispensation whose realisation they have paid for with limbs and lives.

The mood is giddy and expectations high but not without reason.

This is the coming into force of a document every Kenyan hopes will change at least some aspect of their lives.

The change may be political, social or economic but all the same people expect change for the better.

Politics is no doubt the bedrock on which the social and economic pillars sit.

But the economy is the spring from which flows the water that gives life to the other segments.

This is what makes it critical that Kenya get the right mix of policies, regulations, and procedures for the management of the economy in the new order.

It must be understood that in its promises and outlook, the document that is being launched today has re-engineered the power structures in significant ways — especially on the economic front.

For instance, Treasury has lost a good chunk of the unilateral power it had over the country’s fiscal policy and will have to share much of it with a number of institutions, including the Commission on Allocation of Revenues.

And up to 15 per cent of the total national revenues will be allocated to the countries in the quest to devolve resources.

These, it must said, are developments that have the potential of turning out into double-edged swords.

Many analysts have, for instance, argued that the length to which the new Constitution has gone detailing sharing of revenue will make fiscal policy a hard assignment.

As if sharing revenue is all that budgeting entails, the new laws have gone to great lengths establishing structures and processes through which revenue will be shared among the various departments of government and between the central and counties.

Yet conventional wisdom shows that the budget is the one big instrument in the hands of whoever charged with running government to balance the economy, support growth in specific sectors that have the potential of generating more tax revenues, and to manage critical macro-economic policy such as inflation, employment creation, and interest rates.