Kenya’s economy is at deathbed, eliciting cries from workers. Things seem to go south. Top economists have, however, given their suggestions.
The first casualties, as usual, have been county governments, which haven’t received their monthly allocations from the national government for three months.
Speaking during a meeting with fellow governors, Council of Governors (CoG) chairperson Anne Waiguru lamented the situation, and urged the national government to fast track the disbursement of County allocations. “Counties are in danger. We risk grinding to a halt. We have not received money since December. I understand there is a financial constraint, but we urge the National Treasury to know that counties also have workers,” Council of Governors chairperson Anne Waiguru said on Friday.
President William Ruto’s chief economic advisor David Ndii, on his part, advised that the treasury has only two options to pull out the economy from its deathbed: delaying civil servants’ pay yet again, or defaulting on public debt. Whichever the option the national treasury will opt for, the effects will still boil down to the taxpayer.
The University of Nairobi Economics don, XN Iraki, says the government has to take bold decisions to arrest the situation that has the potential of snowballing into an economic meltdown.
Dr. Iraki said that the government has to put in place austerity measures and collect more taxes, in order to ameliorate the situation Kenya’s economy is in today. Prof Iraki sees few options apart from more borrowing. “Bold decisions must be taken, including austerity and more taxes despite depressing growth and unbelievably more borrowing. Lastly, political stability brings economic confidence.”
To add icing on the cake, the current revenue collection has unbelievably received a beating – hence affecting Kenya’s economy. The taxman, Kenya Revenue Authority, is required to collect Sh714 billion in three months to meet the Sh2.1 trillion target for the fiscal year that ends in June (when the country’s budget will be read). This figure means that KRA has to collect about Sh7.9 billion daily, a near impossibility.
Another economist, Ken Gichinga, of Mentoria Economics, says the country needs to reform its tax policies as part of efforts to address the crisis. He says the 17 per cent tax revenue collection as a percentage of GDP is very low compared to a country like Denmark, which is at 34 per cent.
“Kenya has never had a comprehensive tax policy and this increasingly complicates our fiscal policy. The country needs to adopt more progressive policies for it to have sufficient revenues,” Mr Gichinga says.