Our options to turn around the economy hardly plentiful
By Kariuki Muiri
| January 24th 2016
Those who track the performance of Kenya’s economy must be viewing events with increasingly sinking hearts because the options are running thin as days course along.
The Government has a huge Sh600 billion deficit that needs bridging by either borrowing or increasing tax revenue.
Recent events make domestic borrowing off limits. International borrowing is still viable although interest rates will be high due to hiking of fed rates by the US government and the controversy over the Euro Bond saga.
Considering that the Government must service debts worth Sh500 billion this year, the better option would be to increase tax revenue by collecting from idle capacity in the informal sector and reform the Kenya Revenue Authority (KRA) staff competency and collection methodologies to yield an extra shillings one to two trillion annually.
There would be no need to increase taxes. In fact, it would make more sense to reduce the 60 per cent taxes per litre of oil at the pump to about half so as to allow the economy benefit from low international oil prices currently headed to USD 15 per barrel.
Additionally, the Government must increase industrialisation to at least 20 per cent of GDP so as to stabilise the shilling, create direct and indirect employment and help in deepening participation of Africans in the knowledge economy. China is at 46 per cent of GDP. Most of the elite Africans are either land speculators or import merchants, which adds little value to Kenya’s economic sophistry.
Again, power costs are still captive to cartels that signed contracts in the disastrous Moi-era quarter century period whose net effect is continued burdening with artificially high electricity costs to productive sectors and the citizens in general; even as the Government rolls out last mile connectivity and rural electrification.
Therefore, the options that the Government of President Uhuru Kenyatta has in turning round the economy in the 19 months remaining are hardly plentiful.
Perhaps if he concentrated less on politics and worked long hours at his desk, he might have a fairly good chance at reducing record high unemployment currently at about 60 per cent.
A figure bigger that 10 per cent calls for revolutions in the outside world.
However in Kenya, few understand that government-induced poverty is not God-ordained.
The able Chief Justice has come out to say that he wants Judiciary to undergo lifestyle audits.
The president formed a multi-agency forum to work in fighting graft in his government. This body should start with the Judiciary, then KRA and Parliament (including county assemblies).
The 2017 re-election might be won on different levels of perception. These include corruption, security, infrastructure development, unemployment and poverty levels. Where will Uhuru score well?
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