President William Ruto’s nomination of John Mbadi as the next National Treasury and Economic Planning Cabinet Secretary has received mixed reactions from economists.
Mbadi, presently a Nominated MP and ODM national chairman, has been one of the fiercest critics of the Ruto government’s handling of the economy.
From managing the public debt, taxation, and high cost of living to budget making, Mbadi, a certified public accountant, has been at the forefront of putting the Ruto administration on its toes.
As chairman of the National Assembly Public Accounts Committee, he was afforded a forum to oversee what the government, especially the National Treasury, was doing to ensure Kenyans get value for money.
For instance, on October 1, 2022, Mbadi turned to X, formerly Twitter, to hit out at the Ruto government over the rising cost of living, which was blamed on Ruto’s move to drop maize flour and fuel subsidies put in place by the previous government.
Mbadi has also been vocal in opposing tax hikes saying it was not a solution to the ballooning public debt.
“We agree that the debt level is unmanageable but the mistake the government is making is to imagine that it will collect more from Kenyans by increasing taxes. The moment you start attacking people’s salaries, they stop spending,” he said.
“To address this, you must stimulate the economy and you cannot do this when you are shrinking domestic demand,” he added.
It is instructive to note that Mbadi’s imminent entry into Cabinet was the result of stiff opposition to a move by his predecessor, Prof Njuguna Ndung’u, to hike and introduce new tax measures in the Finance Bill 2024, which would have hit Kenyans harder.
President Ruto declined to assent to the Bill and recommended its withdrawal following deadly street protests led by Gen Z.
Mbadi was one of its fiercest critics of the Kenya Kwanza government.
“Kenya Kwanza is behaving like a pickpocket. You know, a pickpocket would not put his five fingers in your pocket to pick your money, what they would do is put two fingers,” he said during a TV show about the proposal to increase the road maintenance levy, pointing to its ripple effects including an increase in the cost of electricity and thus production.
Mbadi, if approved by the National Assembly, will, therefore, be keenly watched on how he balances between getting enough resources to fund the government and cushion Kenyans from high taxes.
Already, he will be confronted with the huge task of financing government operations and programmes on a stringent budget in the wake of the rejection of the Finance Bill 2024.
The development left a hole of Sh346 billion in the 2024/25 budget forcing President Ruto to order austerity measures to reduce the deficit by Sh177 billion with the remainder being borrowed.
A supplementary budget is under consideration in Parliament while the government has also submitted a Division of Revenue (Amendment) Bill 2024, which seeks to reduce the allocation to county governments.
The latter, aimed at finding resources to fund critical national government programmes, is likely to be fiercely opposed by governors, who already have a problem with delays in the release of funds by the National Treasury.
But analysts say it shows how desperate the situation is in government and could have informed the move by the Energy and Petroleum Regulatory Authority (EPRA) on July 14 to hike the Road Maintenance Levy by 39 per cent, pushing it from Sh18 to Sh25 without following due process.
The move has attracted the ire of Kenyans and it will be interesting to see whether it will be part of issues that Mbadi will be confronted with when he takes over the finance docket.
The government had given the Kenya Revenue Authority the target of raising Sh3.4 trillion from 2.7 trillion in 2023/24 to fund its Sh3.9 trillion budget to reduce borrowing in line with agreements with the International Monetary Fund (IMF).
In dropping the Finance Bill 2024, President Ruto risked Kenya’s deal with the Bretton Woods institution, which is keen to ensure the country reduces borrowing due to concerns over her vulnerability to debt distress despite repaying the US$2 billion Eurobond partly due to a resale and lending by the World Bank.
Kenya’s public debt was estimated to have reached 73 per cent of GDP by the end of 2023, with debt service consuming about 55 per cent of revenues.
Debt vulnerabilities
For this reason, IMF has been pushing Kenya to ensure her fiscal strategy is centred on firmly reducing debt vulnerabilities and achieving a newly approved debt anchor by 2029 while protecting high-priority service delivery programmes.
It is against this background that Ruto will be relying on Mbadi’s skills and expertise to manage the national pursuit, which will foremost require him to ensure prudent management of resources by eliminating corruption and wastage, which has flopped in the past.
It will not be an easy job but there appears no other way if Ruto is to succeed in implementing his campaign manifesto that includes creating jobs for the youth, reducing poverty, enhancing access to health and education, and addressing the high cost of living.
Kenyans also expect Mbadi, if approved, to finally give them a true picture of Kenya’s total public debt. Though an audit recently commissioned by Ruto ran into legal headwinds, the Auditor General is in a position to undertake the job to address the questions Kenyans have been asking.