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Civil society lobbies IMF to act tough on Kenya's graft cases

Ethics and Anti-Corruption Commission (EACC) offices at the Integrity centre in Nairobi. [Elvis Ogina, Standard]

Treating suspects of corruption with kids’ gloves will make it hard for the country to collect more taxes and live within its means, the civil society has warned.

A group of 24 organisations under the Okoa Uchumi Campaign umbrella that seeks to push for accountable redress of Kenya’s public debt crisis says the recent withdrawal of corruption cases against high-ranking government officials will make it difficult for the Kenya Revenue Authority (KRA) to hit its collection targets.

“The prosecution and or intended prosecution of corruption cases in Kenya has to be realised, as the assets and the proceeds from corruption are some of the things that can significantly boost the monies available for expenditure by the government,” they said in a memo to the International Monetary Fund (IMF), which has a programme with Kenya aimed at improving the country’s finances.

The programme, in which Kenya will receive over Sh270 billion, is aimed at helping the country to reduce its debt vulnerabilities by collecting more revenues and trimming non-essential spending.

However, the civil society organisations are concerned that dropping some of the corruption cases without any justification will negatively impact on not only good governance practices in Kenya, but also resource mobilisation.

Such developments, they say, will not help the country’s plan to shore up revenues — technically known as fiscal consolidation — as anchored in the latest programme with the IMF.

Edwin Birech, a programme officer at Transparency International Kenya, said a lot of money is lost through corruption and other illegal channels.

“Money is lost through illicit financial flows. We are calling on the government to make use of the existing laws,” he said.

“More often these financial flows have a negative impact on domestic mobilisation.”

There is no data available to show how much the country loses to corruption. However, in January last year, former President Uhuru Kenyatta insinuated that Sh2 billion is lost to corruption every day.

This translates to about Sh730 billion being lost to graft annually, or a third of the national budget.

While this figure is yet to be verified, it is close to what former anti-graft chief Philip Kinisu estimated in 2016.

Kinisu had said Kenya was losing a third of its budget to corruption every year.

State contracts

Civil society wants emphasis placed on the revelation of beneficial owners of companies that win State contracts, just as stipulated in the IMF agreement, fearing that most of the real beneficiaries of such deals are people who are politically connected.

“Procurement goes to companies, but we don’t know who owns the companies,” said Birech.

The IMF programme is also pushing for reform of State-owned corporations to reduce their dependence on the exchequer.

However, these civil society organisations want the government, even as it goes about implementing these changes, to protect the vulnerable groups - the old, poor and people with disabilities.

Experts have questioned the government’s push to slash workers’ salaries by raising their monthly statutory contributions, even as it remains silent on how to stem runaway corruption and wastage.

Besides pushing for increased contributions to the National Social Security Fund (NSSF) pegged at six per cent of one’s income, President William Ruto also wants everyone, including the hustlers who eke out a living in the ubiquitous informal sector where the pay is low and erratic, to pay taxes.

It does not help that corruption cases against some of the people who in the past have been arraigned in court for engaging in graft have been collapsing.

NSSF rates

The introduction of new NSSF rates is one of the ways in which the government wants to mobilise savings to increase investments.

The recent developments, various economists told Weekend in Business, are likely to add to the pain of the high cost of living, which led to prices of basic commodities increasing by a five-year high of 9.6 per cent in October.

“There is a lot of emphasis on collecting, there is less clarity on what they will do in terms of efficiency by sealing the loopholes through which public funds have been lost,” said Dr Joy Kiiru, an economist, told Weekend in Business

The government will soon table a mini-budget in the National Assembly, which is aimed at rationalising expenditure through austerity measures that will cut back on non-core spending such as training, travelling and other operation and maintenance expenses.

Ruto wants the government’s total budget to be reduced by Sh300 billion. 

The president, who was swept into power by euphoric support from millions of poor Kenyans, does not only want to bake a bigger national cake by improving the productivity of sectors such as agriculture and manufacturing but also wants the cake distributed evenly, ending the current sad state of affairs where those at the bottom of the pyramid feed off the crumbs that fall from the high table.

Hustler Fund

He has already said that the Sh50 billion Hustler Fund will be launched at the beginning of December, offering small businesses access to cheap loans of between Sh500 and Sh50,000.

To finance most of his projects, Ruto has said he will be seeking to cast the tax net deeper into the informal economy where traders and workers barely pay taxes on their income.

The government could ride on the IMF, which has already completed the fourth review of its 38-month Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements.

The $2.34 billion (Sh270 billion) programme is aimed at reducing the country’s debt vulnerabilities, to make some expenditure savings.

The IMF wants the country to live within its means by collecting more taxes and reducing spending.

As part of the programme, some parastatals will undergo surgery aimed at weaning them off the exchequer and thus reducing government expenditures.

Moreover, parastatals that are loss-making and are not serving any social purpose such as education and health might be wound up in the fashion of the structural adjustment programme of the 1990s.

Besides weeding out ghost workers from the payroll to reduce the wage bill, the government can, as it has said it has been doing, also freeze employment for a year or two.