Mbadi's unenviable task of reviving economy without increasing taxes

For the young people of this nation, this column projects that the battle is far from over.

In as much as the laws of natural justice demand that we allow the new sheriffs in town time to prove themselves, the reality is that the new cabinet is simply a re-grouping of an old order to self-preserve through a stormy political season.

However, when the coin is flipped towards the individual nominees and the constituents they represent, the crown goes to the new Cabinet Secretary for the National Treasury and Planning, Hon. Ng’ongo John Mbadi. His profile on the website of the National Assembly affirms the celebratory mood picked by sections of the press in Homabay on his swearing-in.

Despite the hand of fate that has brought Hon. Mbadi this honour, there is still a twisted sense of hope for the young people and children of this nation.

If that were not true, how would one connect Ligongo Primary and Kokuro Boys Secondary school with the engines of an economy presently estimated at about Sh15 trillion? How many of us can actually pick those two schools in our map?  

Having said that, this column stands for the demonstrable spirit of an economy in which anyone can aspire to live their dreams in whatever craft they are good at.

For Mbadi, the gods have granted you an enviable chance in the most difficult economic environment in our recent history. The onus is now on your shoulders to make the economy work for the rest of us.

In whatever you do, you must never forget that it was the aloofness of your predecessor to the economic realities of ordinary folks that not only hounded him out of office but also almost sank the KK  ship.

In the spirit of true patriotism and civic duty, this column commits to serve the facts as they are for the sake of our shared economic liberties. Today, we start with highlighting the baselines for key indicators and set our expectations for your tenure at Treasury.

Key baselines

In all fairness, the baseline indicators for the new Treasury CS look bleak. To start with, the President climbed down from his exuberance to declare that he no longer desires to bear the tag ‘Zakayo’ alone. This was a day before gazetting and swearing in his new cabinet.

On the global scene, the world financial markets were in turmoil this week, with stock exchanges across the world shedding billions of dollars in wealth.

The US economy, which accounts for almost 14 and nine percent of global imports for goods and services respectively, is projected to be heading towards an imminent recession.

The Nairobi Stock exchange has not been spared of this turmoil, with the NSE 20 share index consistently on a downward trend from July 31, only to recover marginally on August 7.

For the five trading days, the index dropped from 1,669.73 to 1,633.94 and gained marginally to 1,634.65 the day before the new CS assumed office. The stock market remains one of the best indicators of economic activity for any economy.

The third is the Gross Domestic Product at different levels. The Central Bank Supervision report for 2023 describes it as a year of continued storm that started in 2022.

According to this report, the factors shaping economic growth include geo-political tensions, spill-over effects of high interest rates in advanced economies and adverse impacts of climate change.

Global growth declined to 3.1 per cent and reginal growth was 3.3 per cent in 2023, and projected to grow to 3.8 per cent in 2024.

The Kenyan GDP growth rate rebounded in 2023 to grow at 5.6 per cent from 4.9 per cent in 2022. This was largely driven by the rebound of Agriculture and resilience of Tourism, real estate, financial and ICT sectors.

The Kenya National Bureau of Statistics (KNBS) projects that as a result of this growth, the economy generated 848.2 thousand jobs; 122.8 thousand in the modern economy while the rest were in the informal sector.

Unfortunately for the new CS, the young people say these domestic statistics represent official hubris that they do not feel in the real job market.

The final notable indicator that may be of a lot of interest are the bank balances in the people’s bank accounts.

According to the CBK bank supervision report of 2023, the total accounts held in commercial banks as of the end of December 2022 were 94,643,325; another 3,238,455 were held in microfinance banks.

Of these total accounts, only 1.2 per cent of the commercial accounts closed the year with a balance of sh.500,000. When we factor in the total, including those held in Microfinance banks, the ratio drops to 1.14 per cent of the total 97.9 million accounts.

This reality of people’s finances would become clearer if we were to isolate the corporate and government-owned bank accounts from the total. This bank data represents the most factual evidence of what is happening in the pockets of Kenyans.

The question then is: what options are there for the new CS to appease the suffering masses without squeezing dry government coffers?

Tough choices

It really does not matter what the government imagines is possible; the people do not want to hear anything to do with more taxes.

For the new Treasury boss, any attempt to resuscitate the offensive tax proposals in the rejected Finance Bill 2024 or in the annulled 2023 Act will be courting another disaster. The mood in the country is that the Gen-zs have riddled the country of such official shenanigans.

Further, the Housing levy and soon-to-be Social Health Insurance Funds are potential plagues that new CS may want to avoid at any cost.

Annulling these two levies will leave more money in the pockets of the people and stimulate consumer confidence and consumption in the economy.

The CS must consider further targeted tax relief for businesses to revive production and inspire confidence to resume employment in the modern economy.

The young people of this nation do not want to be sent to do menial jobs in foreign capitals. They said as much during the deadly month-long protests.

Perhaps the most sustainable intervention is a bold restructuring of public expenditure to focus more on community-level development spending.

This could be achieved through well-thought-out stimulus economic programmes and infrastructure projects exclusively for local companies.

Further, the baren Hustler fund must be restructured into an SME fund and advanced as a line of credit by the government through selected local commercial banks.

Contrary to popular view, I still believe the government has access to adequate revenues and policy interventions to rework the economy out of this mess.

However, for this to happen, it will require a radical overhaul of the thinking at Treasury and a political mindset shift. Over to you now Waziri!