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Economy

Tough call as Yatani spells out economic roadmap

Treasury Cabinet Secretary Ukur Yatani. FILE
Treasury Cabinet Secretary Ukur Yatani. FILE PHOTO | NMG 

The newly confirmed Treasury boss Ukur Yatani has outlined an ambitious economic roadmap that revolves around putting money back in pockets and taxing it heavily to finance increased government expenditure.

In a policy pronouncement that largely echoes an economic recovery plan President Uhuru Kenyatta unveiled a day earlier, Mr Yatani said he would spend the next three years pursuing measures that boost liquidity to the private sector.

“The measures include initiating innovative products to boost credit to micro, small and medium enterprises as well as enforcing compliance of earlier directives of prompt and full payment of all pending bills by governments,” he said yesterday at the launch of public hearings on the 2020/21 budget.

On Tuesday, President Kenyatta unveiled measures aimed at widening the produce markets and raising earnings from tea, coffee, milk, rice and potato.

The economy in Mr Yatani’s plan will be growing at a higher rate averaging seven percent annually in the next three years, “due to ongoing investments in strategic priority areas including the Big Four”.

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Kenya’s economy has only reached the seven percent gross domestic product (GDP) growth rate mark once a decade ago when it expanded by 8.4 percent in 2010. It expanded by an average of 5.4 percent in the first three quarters of 2019.

Mr Yatani, however, expects private firms and households to be flush with cash in the next three years, enabling the Kenya Revenue Authority to raise tax collection to 20 percent of the GDP, up from 15.6 percent at the moment.

Latest official data shows that the cash circulating outside banks dropped to Sh176.9 billion in September, the lowest since September 2015.

Analysts have, however, cast doubt on Kenya targets, saying with labour-intensive sectors crumbling and firms grappling with at least 41 tax types, Kenya has a little scope of significantly lifting its growth rate and raising tax collection in the medium term.

“I’m very pessimistic about the collection targets,” said Mr Francis Kamau, the EY tax partner for eastern Africa region. “It is true that the ability to raise taxes depends on the rate of GDP growth but seven percent is not adequate because of the inflation factor involved.”

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