Transition: When Nyachae admitted Kenya was broke
MONEY & CAREERS
By Patrick Alushula | February 1st 2021
NAIROBI, KENYA: It was a rare but truthful admission from the very man who had been charged with the responsibility of planning for the country’s money. And the action did not go unpunished.
In 1998, Finance Minister Simeon Nyachae, the son of the former powerful colonial chief, Musa Nyandusi, shocked the nation with a rare admission that Kenya’s economy was in intensive care unit (ICU).
On the front page of The Standard on Saturday, April 25, 1998, then trading as The East African Standard, the bold headline read ‘Economy in the ICU’ sending mixed signals to President Daniel Moi’s government.
Speaking during an inter-parties caucus at Mombasa Continental Resort aimed at finding solutions to an economy which was described as ‘troubled,’ Nyachae said the economy was ailing and needed to be fixed.
Addressing the caucus, Nyachae spelt out measures to tame corruption which had been identified as one of the major causes of the country’s economic woes.
He said sealing loopholes of theft was key since it was not possible to impose additional taxes on citizens yet they were already overtaxed.
“Sources at the meeting attended by both Kanu and opposition Members of Parliament said that government had admitted that corruption was holding back development,” The East African Standard reported.
The meeting attracted 162 MPs with 82 of them coming from the then ruling party, Kanu. Nyachae’s statement, described as “frank and ignition point” came after the House Speaker Francis Kaparo challenged attendants to speak freely.
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The caucus had been arranged by Centre for Governance and Development (CGD) with the funding from USAID and Friederich Ebert Foundation.
The rare admission was made in the presence of World Bank officials and diplomats from Germany, Britain, Japan, Netherlands and the US.
In his closing remarks after the two-day meeting, Nyachae said Kenyans had become noticeably poor than they were 18 years before, with half of them living below poverty line.
He also told the caucus that the economy had grown at 2.6 per cent per year in the seven years to 1998. The average income of Kenyans, Nyachae explained, had fallen from Sh21,000 per year in 1980 to Sh15,000 in 1998.
In 1998, a dollar was exchanging at about Sh59.
His remarks shocked the Kenya Catholic Church Head Archbishop Ndingi Mwana a’Nzeki. “Why are we broke? Are there no economic experts among us?” he asked in the caucus.
At a separate function in Eldoret, Central Bank Governor Micah Cheserem also said the economy was in shambles
However, despite admitting that the economy was in desperate straits, he expressed optimism that key sectors would be rehabilitated.
“The situation is really worrying. But I am happy that measures to reverse the trend are being effected seriously,” he said.
The then German ambassador to Kenya Michael Gerdts said Kenyans were suffering because resources were being misused. He called on the Government to eliminate budget deficit through cutting civil service and prioritising public programmes.
Mr Nyachae said that domestic debt had risen to unsustainable levels, leading to high interest rates that were prohibitive to investments.
At that time, domestic debt was Sh140 billion.
Too dire was the situation that even supermarkets were selling packaged fruit juices from South Africa and sugar industry was on its knees due to dumping. “That our economy is in recession - interest and inflation rates spiralling alarmingly- is no longer hypothetical but a glaring fact which the government must now address seriously,” David Okwembah, wrote in The Week in Parliament, a section in The East African Standard that used to focus on Parliament.
That time, Nyachae also shocked the country with a revelation that pending bills had reached a high of Sh7 billion.
He even proposed that civil service be trimmed by about 20 per cent to help jump-start the economy. He wanted the number of teachers to be cut since the Ministry of Education was taking 40 per cent of the entire budget.
Of this, the minister said that 80 per cent was being spent on teachers’ salaries.
The meeting proposed a 19-member committee to help salvage the economy. It was also recommended that the number of ministries be cut from 25 to 18.
The leader of Government Business Katana Ngala welcomed the meeting’s seven-point resolutions which recommended among other things that MPs to up fight against corruption and formation of short and long-term economic recovery programme.
But even as he announced that he would crack the whip on tax evaders and other officials who were syphoning public funds, then Ugenya MP James Orengo warned him to be wary of ‘hyenas’ who were surrounding him.
However, commenting on the economy, President Moi said that it was suspect that the International Monetary Fund, World Bank and the European Union had chosen to cut aid immediately prior to 1992 and again in 1997 multi-party elections.
He downplayed the Mombasa talks, saying they were of no consequence and that the conveners acted as if the Government did not exist.
He chided the World Bank for discussing the Kenyan economy with “shady NGOs” in a poorly coordinated meeting, which he said ignored all protocol.
Issuing a statement from the State Lodge, Eldoret, the Head of State vowed not to support any motion arising from the seminar.
Later on in a reshuffle, Nyachae paid the price.
He was moved to the less influential industry docket, a move that saw him opt out of Government.
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