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Only tough choices will save economy

By Ndung'u Wainaina | April 7th 2021

Kenya’s economic problems are not economic in nature. They are political. And the Executive is not the only one to blame for this economic muddle. Parliament is an integral part of the problem. It has failed the Constitution and the people of Kenya by not exercising its constitutional mandate of controlling wanton borrowing and spending of the Executive. 

President Uhuru Kenyatta must admit that his government has made costly economic and fiscal policy management decisions in the past eight years. He must focus his remaining short time in office to lead the country towards an economic stabilisation and recovery path.

The country needs a coherent evidence-based economic stabilisation and fiscal consolidation plan that includes seeking to negotiate and agree with creditors to suspend debt servicing for at least three years with a commitment to immunise core recovery plan from the political cycle.

The National Treasury bizarrely prepared 2020/2021 financial budget that was completely unhinged and divorced from the reality of the devastating Covid-19 pandemic. The budget priorities should be overhauled in special supplementary budget for the remaining part of the financial year. This is not the moment for huge capital expenditure on mega projects.

The FY 2020/2021 budget ought to have been informed by realities on the ground; Covid-19 and its socio-economic impacts. That is where money should have been directed to. That is what all responsible governments are doing the world over. Unfortunately the supplementary budget tabled before Parliament has adopted a 'business as usual attitude'.

The national government must completely overhaul the current Third Medium Term Plan (MTP III) 2018-2022. The existing economic conditions, Covid-19 devastation, shrinking revenue and the debt nightmare have rendered it irrelevant and redundant.

The National Treasury must prepare and present to Parliament an interim transitional Mid-Term Framework plan and budget for the FY 2021/2022. This process must also be carried by county governments.

The FY 2021/2022 budget must purposefully be about addressing the unprecedented health, economic and fiscal shocks occasioned by Covid19. There has to be intensive public participation and consultation. The new MPT should adopt and be guided by the principles of zero?based budgeting to ensure the country drastically reduces all expenditure that it can no longer afford.

Covid-19 has laid bare the stark realities of deep-seated inequalities, inequities and vulnerabilities in the society. The new MTP must reflect the constitutional reality that failure to restructure, align and reorder the old system of national planning and economic policy in accordance with the devolved system of governance and county economic development, poses the greatest economic and financial risk to our country. This is exacerbated by huge debt distress and budget deficit.

Counties must be the central drivers of the new MTP. This is because social and economic devolution is about people managing their local development affairs, developing their potential and setting their own development priorities sensitive to local realities.

The greatest potential for development support exists at the county level, with a focus on attracting investments, creating jobs and boosting demand. A devolved unit's role has expanded from providers of public goods and basic social services to include local economic development initiatives.

Forensic audit

There is urgent need for the National Treasury to open the debt register to an independent international agency for thorough forensic audit to see which debts are genuine, and which ones ended in the pockets of a few people. The comprehensive forensic audit of Kenya's debt will ascertain the true situation before debate on raising the borrowing ceiling can progress. It's foolhardy to proceed and raise the borrowing ceiling without a clear debt picture and its implications on economy.

The national and county treasuries must develop and enforce a public expenditure and financial accountability tool to deliver on three main budgetary outcomes: Aggregate fiscal discipline; strategic resource allocation and efficient use of resources for service delivery.

It will not be easy to return the economy and the lives of Kenyans to where they were before Covid-19. Kenya needs to forge new economic and fiscal social contract. This will require intensive participation and consultation between the people, businesses, the two levels of government, media and civil society in order to rebuild a more productive and equal prosperous society.

-Mr Ndung’u is executive director, International Centre for Policy and Conflict. @NdunguWainaina

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