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The man carrying the hopes of a nation

FINANCIAL STANDARD
By Dominic Omondi | June 8th 2021

Treasury CS Ukur Yattani.

When Cabinet Secretary for the National Treasury Ukur Yatani makes his Budget speech on Thursday, like many Kenyans, President Uhuru Kenyatta will be hanging on to his every word.

With 13 months to the end of his presidency, President Kenyatta will be counting on Yatani to provide a sound strategy on battling against the trilemma of the Covid-19 pandemic, depressed economy, and anxiety over the growing debt burden.

It will be Uhuru’s penultimate effort to free the nation from the iron-grip of the deadly coronavirus disease that has smothered lives and crippled markets.  

The CS will seek to reassure a wounded nation that the stringent measures put in place to contain the invisible enemy, as coronavirus disease has come to be known, are paying fruit.

But to deliver a coup de grace on the virus, Yatani will need loads of cash in the financial year that starts next month - Sh3.6 trillion to be precise.

Consequently, he will be pleading with taxpayers to freely pay their taxes to fund new measures to consolidate the economic gains made since March last year.

The Exchequer has set itself an arduous target of collecting Sh1.8 trillion in taxes by the end of June next year. This is quite ambitious given that the taxman has perennially missed targets.

He will also need to assuage public fears over the growing debt burden to allow him to borrow close to Sh1.6 trillion so as to plug a budget hole that will be left due to total spending exceeding total tax collection.

Last month, Kenyans on Twitter lobbied the International Monetary Fund (IMF) to cancel the Sh256 billion loan that it had approved for Kenya.

They demanded the government account for the over Sh5 trillion that has been borrowed since 2013 before taking on new loans.

And while they have a point in speaking against the binge-borrowing, the timing couldn’t have been worse, according to Treasury officials.

For starters, global economic growth stalled last year, and only a partial recovery is projected this year, with tourism and allied sectors in the hospitality industry that offer big cash continuing to be severely impacted by the Covid-19 pandemic.

In the midst of all this, Yatani has maintained that the economy is limping, but not broken.

“I wish to assure the general public that the government is not broke. However, the Covid-19 pandemic has slowed down economic activities, not only in Kenya but globally. We are prudently managing available resources to ensure continuity in service delivery,” he said last week.

When Yatani replaced Henry Rotich at the helm of Treasury, his overarching goal was to address the country’s fiscal excesses; extravagant spending amidst dwindling revenues had translated into a ballooning budget deficit.

He was particularly irked by the huge uptake of expensive loans, noting in an interview with a local daily that he found a Treasury whose corridors teemed with “loan hawkers.”

Yatani would thus harangue sector working groups – outfits that come up with budget proposals for various state corporations - to temper their expectations and for accounting officers of various ministries, departments and agencies (MDAs) to be more austere.

In November 2019, CBK Governor Patrick Njoroge lauded Yatani and his Principal Secretary Julius Muia for “being realistic” in their revenue projections.

Recently, Yatani set himself up for a major fight with the trade unions after he refused to approve a Sh83 billion wage increase for various collective bargaining agreements. The trade unionists are now baying for his blood.

However, the Treasury’s decision to introduce the 16 per cent VAT on bread and milk powder;  excise duty on imported motorbikes have already been described as ‘anti-Wanjiku.’

He also vowed to stay away from expensive commercial loans, such as the Eurobonds.  

That changed on March 13 last year when President Kenyatta announced that the country had recorded its first case of Covid-19.

“The harsh reality my friends is that we are at war, at war with an invisible enemy who is relentless,” Kenyatta said in a televised address in July as he extended some of the containment measures, including a dusk-to-dawn curfew that has become a common feature in the lives of Kenyans.

Yatani, plucked from the comfort of his office at the Ministry of Labour whose headquarters in Nairobi has eluded the prying minds of journalists, one would have expected the former  Marsabit Governor to recoil under the bright-light-effect when he was put at the helm of the Treasury towards the end of 2019.

But hardly had Yatani settled in his new role than a war was declared by his Commander-in-Chief.

As the International Monetary Fund (IMF) would put it, the Covid-19 pandemic saw a lot of countries begin to institute “wartime policy measures.”

The greater intervention of the public sector, said the Washington-based institution in one of its blogs in April last year, was justified by the emergency.

Itself a budget deficit hawk, the IMF, however, agreed to the government’s expansionary fiscal policy as long as the spending on the war against the Covid-19 pandemic was done in an accountable and transparent fashion.

Kenya, the IMF added, should return to its belt-tightening plans as soon the economy begins to recover. To implement various wartime policies, Treasury borrowed close to Sh1 trillion in the financial year that ended June 2020.

Some of the wartime policy measures that were implemented to cushion households and businesses adversely affected by the pandemic included reducing income tax paid by both workers and employers, value-added tax (VAT), which is paid on the consumption of goods and services, and turnover tax paid by micro, small and medium enterprises (MSMEs).

To boost liquidity for businesses, the government prioritised payment of pending bills, including pending tax refunds; introduced a monthly stipend for poor urban households, and boosted cash transfers to the elderly.

The government also unveiled the Kazi Mtaani project that saw youths employed in odd jobs, such as sweeping roads and cleaning drainages for a weekly wage.

Borrowers adversely affected by the pandemic were given some breathing space in repayment of their loans under a deal struck by the Central Bank of Kenya (CBK) and banks.

Moreover, the listing of such defaulters at the Credit Reference Bureaus was suspended for six months.

To keep the tap of credit flowing to businesses in need of capital, CBK’s benchmark lending rate was brought down seven per cent in what was aimed at availing cheap loans to borrowers stifled by the pandemic.

But jittery banks were not going to lend to SMEs that could easily buckle under the weight of the containment measures.

Thus, Yatani came up with a credit guarantee scheme aimed at de-risking SMEs. The government was going to secure part of every loan that select commercial banks extended to SMEs.

“Had the government instead aggressively cut overall spending or increased taxes in order to reduce its near-term debt financing requirements, this would likely only have further weakened the economy and worsened the crisis,” said a Treasury official.

But now, it is time for the final push.

In normal times, CS Yatani would not have been expected anywhere near the battlefield.

As the finance minister, he would probably be in office – a situation room of sorts – poring over strategy reports, crunching data and impassively approving budgets for various MDAs.

But, in the war against the Covid-19 pandemic and push for economic recovery, Yatani is actively leading one of the biggest battalions, if not the whole army.  

Growth plan

President Kenyatta has since put him in charge of critical arteries of the country’s economy- the Kenya Pipeline Corporation, Kenya Railways and Kenya Ports Authority.  

Yatani’s primary function will be to stimulate economic growth and secure lives and livelihoods for Kenyans.

As the moneyman, Yatani will need to ensure there is enough ammunition to fight the debilitating health effects of Covid-19.

The Treasury has set aside Sh106 billion for Mutahi Kagwe-led Ministry of Health.  Some of this kitty, about Sh12.7 billion, will be used for treating and vaccinating the population.

Covid-19 Emergency Response has been allocated Sh8.8 billion, while immunisations and vaccinations have received Sh3.9 billion.

Critics have argued that the government should also have paid for testing of Covid-19, with Kenyans paying between Sh5,000 and Sh10,000 to get tested.

In the Finance Bill, 2021, decongestants, ventilators and other drugs have been exempted from the 16 per cent value-added tax (VAT), or the sales tax, in what is aimed at reducing the cost of treating Covid-19. But for Yatani to achieve all these, he might have to make some tough decisions like blocking spending on tea, snacks, newspapers, foreign trips and training by MDAs. That could prove counter-productive as such spending helps stimulate the economy.  

Not that he has an option when it comes to cutting non-essential spending after the country made a pact with the IMF to reduce the country’s debt vulnerabilities by increasing taxes and cutting wasteful spending.  

Stepping on the toes of a few State operatives will not be very difficult for a man who was raised under spartan conditions in the dry and dusty plains of North Eastern Kenya.

Yatani appreciates the benefit of being thrifty when your revenues are meagre.

And his experience as a former diplomat, a Member of Parliament and the first governor of the expansive Marsabit County, as well as his training in finance and public administration, seems to have prepared him to help the country navigate the impacts of the pandemic and economic downturn.

“We are working in unusual times, and the government’s policy responses have helped to absorb the worst impacts of the Covid-19 pandemic that have destroyed economies the world over,” he told investors last week.

When he was made CS of Treasury, he made it clear that Kenya is cash-strapped and asked every government official to tighten their belts. This was a clean break with the modus operandi of his predecessor who routinely avoided making tough calls.

Yatani’s priority has been fiscal discipline and stimulating growth. He also maintains an open-door policy that has made him accessible to key stakeholders, including the media.

One of the biggest hurdles to Yatani winning this war are the high political temperatures. Besides Covid-19 pandemic, investors are also keeping their eyes on the ground for a feeble sound of drum beats of war as the country prepares itself for a General Elections next year.  

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