Limitations in Rotich’s Sh3tr budget could up inflation
Economic disparitiesEquality and equity are major sources of security in any country. Nations’ that narrow economics disparities among its citizens enjoy the relative calm, and those who ignore the chaos. It is not clear how much of reducing inequality and redistribution in income is in 2019/2019 budget. The assumption that if we give money to the youth and women, then we are reducing inequality is a bad one. However, if we invest in viable projects that create wealth, women and youth can be absorbed as workers and earn salaries. This woman-youth model has failed because it is not grounded. Maybe, public expenditure can be used to reduce inequalities but this is only attainable in an environment devoid of corruption. It is not enough talking about economic growth when benefits of that growth do not trickle down to the poor majority. There is not much in the budget aimed at diluting the concentration of income among the few rich; if anything, the increase in capital gains tax and related charges could scare middle and lower workers out of major asset markets. I did not see effective use of taxation, to narrow the gap between the haves and have not’s. The fact that the Teachers Service Commission will get Sh3.2 billion to recruit 5,000 tutors when she requires 12,626 teachers is itself telling because this means in a poor setting somewhere will be understaffed and pupils denied quality education. Hopefully, the amount channelled to socially productive sectors, such as health, rural electrification, will help address economic and social injustices. Parliament should also be able to flag down bad government expenditure and revenue collection. The budget is biased. Look at the additional tax on beer, wines, and whiskey.
Local industriesBeer, which is popular with the poor, will be taxed at a higher rate than whiskey. The budget appears not to protect local industries yet our problem has been cheap imports. I do not understand why the allocation of miraa is higher than sugar, yet the sugar sector is on its death bed in this country. In any case, miraa and cigarettes are on par. The biggest catch in this budget is that we have a deficit of Sh600 billion i.e the governments estimated expenditure is far more than the estimated revenue. It is okay to adopt a deficit budget to meet the need of the people and to correct unemployment. But in our case deficit budget will hurt if it translates into excessive wastage through government expenditure and costly borrowing. The feeling is that we borrow expensively and waste. We are in a bad situation, mass unemployment, and a huge costly debt burden. The budget did not solve the high-interest rate on government bonds. Literature confirms that budget deficit translates into financial instability. If we continue borrowing, our currency will weaken. Deficit budget will send a negative signal to foreign investors in addition to encouraging wasteful expenditure. I suspect such a huge budget if not adequately backed by real production can send us into a depression. Treasury should answer to what circumstances should a country adopt a deficit budget? Are we generating enough revenue to service government debt? -The writer teaches at the University of Nairobi
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