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Economy

Post-poll hard times await Kenyans as subsidies end

An elderly woman collects spilled government subsidised maize at the National Cereals and Produce Board in Kabarnet, Baringo county, last month. Life is bound to get tougher for Kenyans as the incoming government must end the subsidy programme due to its unsustainability. FILE PHOTO | NMG
An elderly woman collects spilled government subsidised maize at the National Cereals and Produce Board in Kabarnet, Baringo county, last month. Life is bound to get tougher for Kenyans as the incoming government must end the subsidy programme due to its unsustainability. FILE PHOTO | NMG 

Millions of Kenyans could be staring at hard economic times after the General Election next week as many of the pre-election subsidies running into billions of shillings are set to end with the campaign season.

The government, keen not to placate voters, has philanthropically pumped huge sums of money into subsidies that are timed to expire just after the elections, leaving millions exposed to the harsh realities after the political courtship season ends at the ballot.

While Monday was to be the last day the maize flour subsidy was scheduled to run, the government has indicated plans to push the subsidy until September, citing delayed and inadequate harvests from the grain basket region of North Rift.

The subsidy, which involves millers buying maize at Sh2,300 for a 90 kilogramme bag from importers who acquire the commodity at  Sh4,000, has seen some Sh4.5 billion spent as the State settles the difference.

The Sh6 billion allocated for the plan is fast getting depleted and its extension to September may require more funds from the exchequer.

Economic experts, however, now argue that the reality will hit hard after the elections as the government may find it extremely unsustainable especially in the wake of pilling debt obligations.

Mr Gitau Githogo, a Nairobi based economic analyst, say the holes from which the money used to keep Kenyans floating on the subsidies will have to be plugged no matter which team takes power after the election causing a sudden shock on the cost of living which has been hanging on the handouts.

“The country will have to increase its revenue collections by a very high margin or borrow more to fill the holes where these subsidies were removed from as much as we are already struggling with debt and more are due for repayment especially the infrastructure loans. They will not even last till September because by next month we shall have begun feeling it,” Mr Githogo said.

Wait for funds
He said most contractors are currently forced to wait for funds while government suppliers have also been held to wait as it is normal for processes to slow down during elections.

Demands from these debts according to him will force the government to abandon the expensive subsidy plans including those that allow for duty free maize and milk powder imports and focus on meeting the obligations.

The country will also have to make a bigger spending plan in light of the spent cash on subsidies as much as they have foregone millions of shillings in revenues especially on customs.

Kenya also extended a 9,000-tonne window to import duty-free milk powder into the country until end of September in what is seen as a way to keep the prices of milk sustainable until after the elections.

Nairobi based policy analyst Ilunga Mpyana also concurs that the subsidies, which are usually not planned for, may prove less worthy after the elections as they will not have any political net gains to be continued.

“They are short term measures and since the money spent has no return, it tends to be an expensive affair which no government would want to drag for long. Ghana made similar handouts in wage increases and ended up being forced to borrow heavily after elections. In the Kenyan scenario, there will be no political capital for whichever team governs after the elections hence the reality of life without the subsidies will be felt in the higher cost of living,” Mr Mpyana said.

Weak monitoring

With weak monitoring systems, greedy traders who will no longer be on the pricing radar of the subsidised commodities will also hike the prices to the detriment of the citizens.

Travellers currently enjoying train trips to the coast at subsidised Sh700 for the third class and Sh3,000 for first class passengers may also find the going tough since the analysts argue that the returns are not even enough to run the service.

The government which recently increased the minimum wages and salaries to civil servants had also carried out an audit which had recommended the sacking of 40,000 civil servants last year but shelved the plan over fears of political backlash.

The plan which was hatched to tame the ballooning wage bill under the Capacity Assessment and Rationalisation of the Public Service, had found many government departments overstaffed but warned of political implications if implemented.

‘’The retrenchment may spark votes shifting due to ethnic based politics, spur ethnic volatility and breakdown between those removed and those retained, and  be  used as an election campaign tool to attract sympathy votes.

"It may also increase political rhetoric painting the government of the day as insensitive to its citizens,” noted the 2015 report.

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