President Uhuru Kenyatta is facing a rebellion in Mt Kenya region over claims that the government has neglected the area that overwhelmingly voted for Jubilee.
The rebellion, which has been simmering, boiled over on New Year when Gatundu South MP Moses Kuria openly accused the President of ignoring the region and focusing on developing areas that voted the opposition.
According to Moses Kuria, at a time like this last year, Kenya’s economic head was stuck in three traps. The public sector was in a trap of debt, high recurrent expenditure and lack of innovation in our economic thinking.
The private sector was in a trap of low economic activity where everything was almost grinding to a halt. The political system was in the normal trap that comes with our five year electoral cycle, this time exacerbated by a repeat election and a recalcitrant opposition that rejected both results. twelve months down the line, nothing has changed on the first two traps.
At least the handshake has lifted the third trap, thanks to President Kenyatta and Rt Hon Raila Odinga. But Kenyans have nothing much to celebrate this Christmas. The government recurrent expenditure of Ksh 1.5 trillion continues to wipe away all our tax revenues of a similar amount meaning we are borrowing (mostly short term) for our entire development budget , debt repayment and pension payments.
In this convoluted economic mathogothanio, Treasury has zero leg room for discretion let alone capacity to spur economic growth. One would then expect the Private Sector to substitute the injured public sector at half time.
But alas! The private sector is equally injured. Both the national and County governments are not paying suppliers and contractors thus choking the system. The effect of the Jude Njomo inspired interest rate capping is such that banks are making super normal profits lending money to a thirsty and hungry government that needs to borrow for debt recycling, development budget and pensions servicing.
The biggest loser becomes the SMEs who are the biggest driver of the private sector. Banks have zero incentive to lend to anyone when the risk free Treasury bills and bonds are low hanging fruits. If nothing is done in 2019, recession will kick in. We need to reflect and introspect. Ni Kubaya.
For starters, we need to amend the Jude Njomo Act to raise the cap from 4% to 10% above the CBR. This will provide banks with more headroom for risk based pricing and hopefully re-ignite private sector activity through lending to SME’s while at the same time denying Treasury of easily available funds for domestic borrowing thus forcing it to adopt innovative economic thinking. Secondly, we need measures-including legislative-to force national and county governments to pay suppliers and contractors on a weekly basis.
This has been tried and tested successfully in other economies. Finally, we must milk the handshake to fix our economy. We must take advantage of the handshake to reform the civil service through a massive ‘voluntary’ early retirement that will retrench at least half of public workers. We can no longer bandage this wound any more. Open the Emergency Room and call in the surgeon.
Is Moses Kuria really addressing the right issues?