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Economists' mixed views on contested 16pc fuel tariff

By Moses Michira | Published Fri, September 7th 2018 at 00:00, Updated September 6th 2018 at 22:13 GMT +3

Nasa strategy committee members David Ndii and Koitamet Ole Kina addressing the press at Okoa Kenya secretariat. He says that Government has no projects to show for borrowed funds. [File, Standard]

Kenyans may have to wake up to the new reality that the country is in debt distress, and, sadly, deal with it through painful interventions including default.

There is no further scope to raise revenues locally through taxing already over-burdened citizens, especially after imposing value added tax on petroleum products.

These are some of the views held by David Ndii, the controversial economist who has repeatedly warned that the country was nearing tipping point.

“We are in a debt crisis and we just cannot pay so let everyone bear the consequences,” he said, adding, "where is the next target for taxation, would it be medicines?

"Among the realistic ways out of the difficulty is to allow the lenders to auction the country, possibly through the clamping of strategic assets such as the Standard Gauge Railway line funded by Chinese loans."

Mr Ndii claimed that most of the proceeds of the runaway borrowing could not be traced because they were never invested in the economy in the first place.

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On additional borrowing to retire maturing loans, Ndii said it would be imprudent because there was no miracle ahead that would suddenly change the fortunes of Kenya.

“If we know our problem is in borrowing, then the simple thing to do is to stop immediately. An alcoholic cannot deal with their addiction without giving up drinking,” said the former Opposition coalition strategist.

Ndii further asserted that stopping accumulation of more debt meant the country would not have any budgets for development as all the revenue collected would be spent on repaying loans, salaries and other recurrent expenses.

He gave examples of Zambia and Argentina, which walked the same path as Kenya and engaged in unchecked borrowing only for the lenders to abandon them when they were most in need.

“Where was the International Monetary Fund to help them (the two nations)? Now their economies have been ravaged and their currencies are dead,” Ndii said.

But Gerishon Ikiara, who teaches economics at the University of Nairobi, was more optimistic in his opinion that the country could do with even more taxes.

He hit out at the National Assembly for voting to postpone the implementation of VAT on petroleum products, adding that the legislators acted in “bad faith”.

“It is like these MPs are sabotaging development for the country,” Dr Ikiara said.

In his assessment, Kenyan citizens need to choose between development, which comes with heavy taxation, or more debt and poverty.

“Ordinary Kenyans might be happy but they are not aware that they are shooting themselves in the foot,” he said in reference to the shelving of steep taxes

 


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