Three news items in the past fortnight have hinted at important questions on the road ahead for Kenya in the coming three to five years.
First, the International Monetary Fund (IMF) extending its standby credit agreement (SBA) by six months during which time it will complete “outstanding” reviews while government cuts its fiscal deficit, substantially modifies interest rate controls (and modernizes its monetary policy framework) and completes financial sector, public finance management and statistical reforms.
Notably, IMF’s press release points out that Kenya will only access funds under the SBA once the review is completed in September 2018. We spoke about this extension last week; interesting times lie ahead.
But here’s a new irony. A March 2018 IMF working paper on The Distributional Effects of Spending Shocks in Developing Economies notes that “unanticipated fiscal consolidations lead to a long-lasting increase in income inequality, while fiscal expansions lower inequality”. This research paper covered 103 developing countries between 1990 and 2015.
It observes that reduced total government expenditure has a greater multiplier effect on inequality than public investment and consumption, but further, that the effect of reduced public investment is greater than that of consumption. Finally, it finds that unanticipated fiscal consolidations lead to an increase in poverty.
What does this mean for us? If we consolidate (because of fast growing debt service obligations), inequality and poverty increase. So the only way to avoid this (and keep growing) is to keep borrowing. Interesting times indeed!
The second piece of news concerned that Sh300 billion-plus Nairobi-Mombasa toll expressway.
Let’s walk through this slowly. We just built a standard-gauge railway (SGR) right next to the old meter-gauge railway. The old railway ran, in many parts, parallel to the current Nairobi-Mombasa highway. Now we will have a dual carriage expressway running parallel to the same highway.
Four parallel and contiguous Nairobi-Mombasa routes, excluding air travel.
Who does these traffic projections? While there is little question about the technical feasibility of this stuff, is it economically sustainable or financially viable?
Recall that the SGR is struggling to attract freight traffic while passenger traffic is subsidised. How much vehicle traffic will be required to pay for the tolled expressway, remembering that plans to toll Thika super-highway never came to fruition?
What of public participation, as Parliament asked this week? Where is the overarching national transport network strategy that informs these costly mega-investments? Back to the earlier point about debt-driven growth, and its sustainability.
The third news item takes us a fortnight back, to the ‘Building of Bridges’ handshake between President Uhuru Kenyatta and “People’s President” Raila Odinga.
While the optics and accompanying communiqué brought widespread praise in the immediate, a sense of limbo persists, with occasional sprinkling of usual politics, especially around the Nasa coalition. That mainstream media are unable to get behind the “backroom discussions” leading to that March 9 announcement has further contributed to idle speculation.
Increasingly, we have as many interpretations as there are commentators — ranging from economic reform to Agenda Four to constitutional reform. It isn’t clear what the “deal” meant or didn’t.
I have no inside track on where this accord is going but I can guess. It isn’t about Agenda Four, which emphasised constitutional and institutional reform, but more about national and individual culture reform, or rather, values agreement and culture change.
It speaks to a change management approach that steps away from the three traditional approaches – change by logic (empirical-rational), by force (power-coercion) or evangelism (normative-re-educative). We’ve tried all that before.
Instead, we might be looking at a “change by shared visioning” approach (aspirational-reconstruction). In other words, moving towards what on 27 August 2010, former President Mwai Kibaki called a “social vision” – the third pillar in Kenya’s development after the (political) Constitution and (economic) Vision 2030. For the avoidance of doubt, this refers to a vision of society, not for the social (services) sector.
Consider a social vision underpinned by a right-based and responsibility-aware shared national ethos and identity, built around a virtuous circle of ethnic harmony, just electoral outcomes and inclusivity, and driven by integrity, transparency, accountability and human security. All geared towards shared prosperity and human progress, and sustainable political and economic devolution outcomes.
That’s a quick and positive vision built on the nine issues framed in the ‘Building Bridges’ communiqué.
As I have said before, we probably have the next three years (to 2020) to get this nation building process going even as we confront the earlier mentioned challenges around the economy, investment, State building and the fiscal and debt affairs of government. Before pre-2022 election shenanigans begin.
My greater sense is we need to begin all of these conversations now, not tomorrow or next year.