Careful steps that can take Kenya off the fiscal cliff

Wednesday, September 12, 2018 19:25

Growing exports, disciplined expenditure and debt management would tame slide.

There’s a need to have an independent Budget Office. FILE PHOTO | NMG 


  • Growing exports, disciplined expenditure and debt management would tame slide.


It is amazing how Kenyans have this week reacted to the increase in fuel prices. There have been calls for less corruption, waste and mismanagement, better spending and more efficient (that is, less painful) revenue collection.

Not forgetting similar demands at the county level where “the rubber meets the road”, and the peoples’ aspirations are supposed to be met. Our democracy is emerging.

A prevailing question across the board is whether or not projects equal corruption, which effectively tells us about Jubilee’s lack of a “policy-programmatic” approach to project identification. Our super-competitive politics means that projects of previous leaders are “stalled” even as the projects of new leaders are launched.

President Uhuru Kenyatta’s recent demand that no new projects begin before older ones are completed was, in effect, a case of closing the barn door after the horse has bolted.

I have never understood, over the past few years, what has changed at the Treasury, now labelled as “incompetent”. Other than Mr Kenyatta (who became President) and Dr Joseph Kinyua (now Chief of Staff in the Presidency), as far as I know, the Treasury leadership team is intact from the days of former President Mwai Kibaki. As far as I could tell, these people all knew what they were doing.

But did they? When, as early as 2014, the IMF started computing our official budget deficit “excluding the SGR”, I felt something wasn’t right. When, today, the IMF demands that we develop public investment rules (and criteria), this hurts more than any fuel price increase.

When the Treasury advertises jobs for debt managers, and donors chime in with an offer for a new PFM co-ordinator, then we should know that our public finances have gone awry.

But it’s not just the fiscus that’s wrong, it’s also the economy. In our current state, six per cent GDP growth will only happen with more SGR investment, not productivity, or jobs – basically, more debt. It is painful to think that, outside of SGR and other mega-infrastructure spending, we’re operating at “KANU-level” growth rates. I suspect that the IMF, World Bank and United Nations long figured this out.


There are no immediate answers, or quick fixes to our econo-fiscal parlour. If Mr Kenyatta signs the 2018 Finance Bill, we face a budget hole that affects service delivery, most likely in counties. If he doesn’t, he raises the cost of living for Kenyans.

Recall that this is one of the top three issues that public opinion polls have called government out on in the past decade. However, there’s a limit to populism, so let’s prepare to live with these new fuel prices if we don’t want government to collapse.

As Kenyans, let’s demand better behaviour from government. There are many systematic answers to our current plight, because we are in crisis. Here are four quick thoughts.

First, let’s take a strategic view on our economy and where we want to go. There’s a political angle to this, but it’s important that we figure out — at national and county level — what we can make and sell (exports) before we rush to buy (imports).

I have seen the McKinsey original on the Big Four agenda and it speaks to tremendous value chain possibilities in our core agricultural competence. Add this to great ideas from the Nasa (remember that party?) manifesto. Let’s think through a new “circular flow of opportunity and income all round”.

Second, let’s find expenditure discipline. Our Constitution effectively defines the National Treasury as a cash management institution. Planning and budgeting, as Mr Kenyatta once said, should rest in a serious US-style Office of Management and Budget (OMB). A proper OMB would surface the expenditure “nonsense” that Kenyans pay for at national and county levels. That’s not happening now.

Third, find “painless” revenue opportunities to balance the budget. This is Treasury’s work. Two points here. It’s not about snatching lucrative ‘e-Citizen’ services back from what seemed like a viable Government Digital Payment Services platform. It’s about moving towards a national digital payments infrastructure that works.

Finally, let’s commit to debt management as an anti-corruption matter. It’s embarrassing that we’re operating at Greece-style levels on our fiscus because our lack of moral discipline has a railway that’s unviable, electricity that nobody can pay, dams that might not have water, failed mega-irrigation projects, super-expensive pipelines and importers who kill us with bad maize, rice, sugar and the like.

Let’s start again, from scratch.

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