From left: President Uhuru Kenyatta, acting Treasury Cabinet Secretary
Ukur Yatani, Central Bank of Kenya Governor Patrick Njoroge and Kenya
Revenue Authority Commissioner-General James Mburu. They have a huge
task of correcting blunders that have weakened the economy. PHOTOS |
FILE | NATION MEDIA GROUP
Four men, among them President Uhuru Kenyatta and acting
Treasury Cabinet Secretary Ukur Yatani, will determine the trajectory of
Kenya's economy in 2020.
The other two are Central
Bank of Kenya (CBK) Governor Patrick Njoroge and Kenya Revenue Authority
(KRA) Commissioner-General James Mburu.
Mr Kenyatta must make decisions on competing national interests fighting for a stretched resource envelope.
Major
decisions, including the size and priorities of the budget, are always
approved at State House through a Cabinet meeting. The same happens for
supplementary budgets.
The President sets the tone on
government expenditure and is the missing link in the efforts to cut
wastage and trim the fat straining taxpayers.
The other crucial function of the President would be to keep the momentum on the war against corruption and give more resources to investigative agencies.
THE DEBT PROBLEM
Mr Kenyatta says 2020 can be the best year for Kenya if all play their roles effectively.
“We
continue to make progress in education, healthcare, food security and
nutrition, infrastructure, renewable energy, defence and security,
industrialisation and many others in addition to laying the foundation
for enduring prosperity within a happier … Kenya,” he said in his New
Year message.
The President added that while 2019 was
not without challenges, the country can take pride in the extent to
which progress was made towards attaining national aspirations as
espoused in the Constitution, Vision 2030 and through the Big Four
Agenda.
Mr Kenyatta admitted that all is not well.
“There are those … who have had a difficult year … It is my hope that
the New Year will usher in better days for all of us,” he said.
Mr
Yatani has the task of correcting the mess left by the previous regime
at the Treasury accused of doctoring budget books and pushing Kenya’s debt levels to dangerous territory.
In its latest Kenya Economic Update released
in October 2019, the World Bank warned that with 43 per cent of the
country's domestic debt maturing in a year, the government could face
challenges in rolling over such bonds in an environment of no interest
rate caps, low subscription rates and exposure of commercial banks to
these assets.
CREDIT RATING AT RISK
Mr
Yatani has to work hard to fit in a ministry that is closely watched by
the World Bank, the International Monetary Fund and dozens of
multilateral lenders.
Top for him would be to deal with
debt. One of his options is to seek cheaper concessional loans to help
retire the more expensive and short-term commercial ones that have seen
the country stare at a Sh1 trillion debt repayment burden this year.
He
is between a rock and a hard place given that he will come face to face
with the reality of Kenya’s debt burden amidst missing revenue targets.
Defaulting on loan repayment would expose the country to ridicule globally.
It
would also result in downgrading of its credit ratings. Signs of
distress in paying debt came to the surface last year when it emerged
that Kenya had defaulted on a Sh500 million loan owed to a Belgian firm
for a water project.
Credendo Export Credit Agency
wrote to the Treasury demanding payment by November 1. It accused the
government of failing to pay despite numerous reminders.
According
to the World Bank, Kenya is spending up to 18 per cent of its tax
revenue on interest on domestic loans, up from 16.3 per cent in 2016/17.
AUSTERITY MEASURES
The
ratio of debt to GDP has also shot up from 59.1 per cent in 2017/18 to
62.3 per cent in 2018/19, racing towards levels that are fuelled by an
insatiable appetite to plug the hole with fresh debt.
The
bank recommends a 50 per cent ratio. The country has a Sh607.8 billion
deficit on its Sh3.02 trillion budget. The deficit was Sh559 billion
last year.
Mr Yatani is to implement the latest round of austerity measures that will put him on a collision path with State agencies.
The full import of his directive to suspend benchmarking and study tours should be felt this year.
He
also cut government delegates for missions abroad to a maximum of four,
restricted domestic air travel to economy class and slashed purchases
of newspapers and furniture by 75 per cent.
How the CS handles these as he prepares yet another budget will show if he is the right man for the job.
Whereas the Treasury is in charge of the fiscal policy, Dr Njoroge handles the monetary policy.
Aggressive
expansion of the fiscal stance of Kenya, which means increase in
government expenditure, puts a strain on the monetary policy.
INTEREST RATES
Dr Njoroge will deal with this to an elevated scale as the government prepares to head out for a new round of borrowing.
Mr Yatani made this intention clear when he said the government would run broke if Senate blocked an increase of Kenya’s debt ceiling to Sh9 trillion.
Dr Njoroge will also be tasked with putting banks on a leash so that they do not go back to the era of expensive interest rates.
“CBK
has secured commitments from banks that they will act responsibly … now
that the interest rate caps have been repealed. Banks have no choice
but to work for and with Kenyans,” the governor said.
His
other task would be to control the government in the local domestic
borrowing market to ensure it does not crowd out the private sector.
The effect of the 2019 currency demonetisation will also start being felt on the economy in 2020.
REVENUE HEADACHE
The
taxman has one of the most difficult jobs. On one hand, Mr Mburu must
find methods of meeting the ambitious targets thrown at him, but do that
without hurting and disrupting industry.
Mr Mburu
would be counting on his intelligence background to net tax evaders and
take the war against the cheats to their doorsteps.
Last
year, he became a nightmare for big taxpayers. His actions to close
revenue leakages were described by some as weaponising tax collection.
If
Mr Mburu continues missing revenue targets, the economy will suffer one
way or the other since the government would be made to borrow more or
cut back on key development expenditure.
It is near impossible to tamper with salaries and debt obligations that form the bulk of recurrent expenditure.
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