State must en­sure Kenyans’ in­ter­ests al­ways come first

Business Daily (Kenya) - - IDEAS & DEBATE -

As the Trea­sury awaits nal word from the In­ter­na­tional Mone­tary Fund (IMF) on the Sh152 bil­lion stand-by credit ar­range­ment, it will be pru­dent for Kenyan au­thor­i­ties to rst look at the in­ter­est of cit­i­zens. Kenya has re­cently been en­gulfed by a ma­jor eco­nomic cri­sis fol­low­ing the introduction of a 16 per cent levy on pe­tro­leum prod­ucts in de ance of a par­lia­men­tary vote de­lay­ing the tax for two years. The IMF had pegged ex­ten­sion of the stand-by credit fa­cil­ity, used for bal­ance of pay­ments sup­port, on a num­ber of mea­sures, in­clud­ing re­peal of a cap on com­mer­cial lend­ing rates that came into force in 2016. Mp shave also voted to re­tain the le­gal cap son bank rates, which the IMF wanted scrapped or modi ed in re­turn for a new standby ar­range­ment. In essence, im­po­si­tion of the new petrol tax poses the dan­ger of dis­rupt­ing the econ­omy in a ma­jor fash­ion. Yet not levy­ing it also ex­poses the coun­try to a ma­jor debt ser­vic­ing risk aris­ing from the heavy loan obli­ga­tions that abound. The essence of it all is that Kenya in­vited this cri­sis upon it­self with the re­cent bor­row­ing binge and can­not hope to blame ex­ter­nal in­ter­locu­torssuch as theimf whose sole in­ter­est is en­sur­ing the long-term health of Kenya’s pub­lic nances to avoid a Greek-type of cri­sis in the fu­ture. The re­al­ity is that im­pos­ing the petrol tax has im­mense neg­a­tive rami cations on the econ­omy. It bears the prospect of rais­ing the cost of trans­porta­tion and that of run­ning machines in in­dus­tries, forc­ing goods and ser­vice providers to raise prices to cover ad­di­tional cost of do­ing busi­ness. Be­sides, this tax un­der­mines Kenya’ s quest to be­come a least cost pro­ducer of goods in or­der to at­tract in­vestors and gen­er­ate jobs. The fact, how­ever, is that a blind ap­proach to the is­sue in the fash­ion that the Mps­dido er­sno so­lu­tion to the prob­lem. Sus­pend­ing the tax amounts to o er­ing too sim­plis­tic a so­lu­tion to a deep and com­plex eco­nomic prob­lem. What is needed isa re­view of the Sh 3 tril­lion bud­get and the re­moval of non-es­sen­tial ex­pen­di­ture in or­der to pro­vide the nec­es­sary sc al space to main­tain the sta­tus quo. Only then will the leg­is­la­tors make a mean­ing­ful con­tri­bu­tion to re­solv­ing the huge debt prob­lem they have partly caused by pass­ing suc­ces­sive bloated bud­gets that in­cluded heavy bor­row­ing in re­cent years with­out think­ing of the coun­try’s abil­ity to pay.

Kenya in­vited this cri­sis upon it­self with the re­cent bor­row­ing binge

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