We need more Adani-type deals to grow, says Mbadi

The National Treasury and Economic Planning Cabinet Secretary John Mbadi addresses a press briefing on first 50 days in office at the National Treasury offices in Nairobi on October 16, 2024. [David Gichuru,Standard] The government is eyeing five Adani-like deals in the current financial year in what National Treasury Cabinet Secretary John Mbadi said would enable the government finish projects key to the economy without straining the exchequer and resorting to heavy borrowing. He said as part of his performance contract, he had committed to handing over to private sector players at least five major projects that will be developed under the Public Private Partnerships (PPP) model. Mr Mbadi said this would be the only way the government could continue undertaking major development projects without heavily borrowing while retaining the little resources the National Treasury has. The CS spoke Wednesday at a press briefing where he shared highlights of his first 50 days in office. Mbadi promised to lower taxes, specifically Value Added Tax and Corporate Income Tax, to put more money in Kenyans' pockets. At the same time, he conceded that the government may have agreed to unrealistic conditions set by the International Monetary Fund (IMF) such as agreeing to impose higher taxes to access the global lender's extended credit facility. "The truth of the matter is that we cannot finance these mega infrastructural developments from our balance sheet. Therefore, we need a partnership that does put a strain on our exchequer and also does not commit us to additional loans," said Mbadi on why the government needed more PPP projects. The Energy Ministry announced it had signed a Sh95 billion deal with Adani Energy Solutions, the sister firm to Adani Airport Holdings that is eyeing operations at the Jomo Kenyatta International Airport for 30 years, to build and operate high voltage electricity transmission lines. Mbadi noted that JKIA needed urgent improvements. "In the case of JKIA... the worst that can happen may be that they will not give us a fair share of the revenue that will be generated or they will be inefficient. If you use JKIA, you will realise that the current arrangement is not working properly and we will lose to competitors. Rwanda is coming up very strongly, Ethiopia has developed its Airport, Kenya must follow suit and do it urgently. What we must do is take care of public interests... that we are not going to have Kenyans lose jobs," he said. He said the government intends to get into at least five such agreements across different sectors over the current financial year that runs to June 2025. "We have committed, as part of our performance contract, to at least five projects," said Mbadi, adding that these would include Privately Initiated Proposals (PIPs) as is the case with Adani and JKIA. "Already in our five projects, JKIA had started and if the courts can clear and allow the process to continue, it will be one of the projects. In fact, we should start with it. JKIA must be developed." "Something needs to be done about JKIA, let us face it, that airport is too old for Kenya. It is even a shame for an economy like Kenya to continue having the airport in such a state. And when you tell Kenyans about PPP, they think you are selling it. If it is not Adani, let us get someone else to do it but it should be done... otherwise we will lag behind Uganda and Tanzania," he added. Mbadi also said there are plans to lower taxes and reduce interest rates on bank loans, to address the issue of money circulating in the economy. He noted that one his assessments after getting into office had been that while the economic fundamentals are sound as seen through such indicators as lower rate of inflation and quarterly GDP growth rates, Kenyans felt that the country is headed the wrong way owing to lack of money in their pockets. "We have to reduce the pressure on Kenyans and to do this, we must lower value added tax and corporate income tax to 25 per cent," he said. "The economic fundamentals are working but Kenyans continue to complain that they do not have money in their pockets." Mbadi also noted that the pushback by Kenyans in June as they rejected the Finance Bill 2024 may have been on account of the government's overzealousness as it sought to increase tax collections to meet requirements set by IMF. The IMF had offered Kenya a 38 month extended credit facility since April 2021 and to access the funds disbursed periodically, the country had to show it has been meeting the set conditions. These included higher tax collections, doing away with subsidies, parastatal reforms including reduction in bailouts and privatisation of some and reducing the budget deficit. While the CS noted that Kenya cannot sever links with the IMF, he noted that the conditions that had been set were unrealistic. "I believe that some of the targets we had set with the IMF were unrealistic. You cannot come from a fiscal deficit of 5.2 per cent to GDP and go to 3.8 per cent. It should have been gradual," he said.

We need more Adani-type deals to grow, says Mbadi

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We need more Adani-type deals to grow, says Mbadi

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