Bottom-up economic agenda hits turbulence on takeoff

Demonstrators match along the streets of Nakuru City to protest against Finance Bill 2024 on June 20, 2024. [Kipsang Joseph, Standard]

President William Ruto’s ="https://www.standardmedia.co.ke/business/business/article/2001495933/kenya-kwanza-unapologetically-abandons-beta-moves-on-quietly">Bottom-up Economic Transformation Agenda (Beta)< is facing an aborted take-off as he institutes a Sh346 billion budget cut in the coming financial year.

The cuts, which have been necessitated by ongoing political unrest against his regime, not only put the planned development projects in jeopardy but also raise questions on if Beta is still the path to economic freedom.

The ="https://www.standardmedia.co.ke/testbed/counties/article/2001489555/broken-promises-and-more-pledges-make-ruto-master-of-doublespeak">Kenya Kwanza manifesto< which anchors the agenda stipulates that in the five years Ruto’s administration will be in office, Sh2.67 trillion will be required to implement it.

This has been broken down to Sh473 billion in the first year, Sh516 billion in year two, Sh537 billion in year three, Sh559 billion in year four and Sh583 billion in the fifth year.

This is according to a report from the Parliamentary Budget Office (PBO) titled ‘Assessment of the cost implications of the Bottom-up economic transformation plan 2022-2027’.

The Beta agenda has five key priorities: agricultural transformation, micro, small and medium enterprises (MSMEs), affordable housing, digital superhighway, and universal health coverage.

Both the 2023-24 and the 2024-25 budgets were themed around Beta, with this year’s being ‘Sustaining Beta, Fiscal Consolidation and Investing in Climate Change Mitigation and Adaptation for Improved Livelihoods’.

From the proposed cuts as communicated by President Ruto, agriculture, which is a key priority in Beta agenda will be among the affected.

“Part of the money we were going to raise Sh10 billion was to go to fertiliser subsidies,” Ruto said when he communicated the withdrawal of the contentious Finance Bill 2024 on Wednesday.

Another Sh6 billion was to facilitate the implementation of universal health coverage.

While presenting the budget on June 13, National Treasury and Economic Planning Cabinet Secretary ="https://www.standardmedia.co.ke/sports/amp/financial-standard/2001497781/the-big-ask-inside-treasurys-unlikely-plan-to-lower-gaping-budget-deficit">Njuguna Ndung’u< said since assuming office, the Kenya Kwanza government has implemented bold policy measures to mitigate these negative shocks and embarked on structural reforms under the five Beta pillars.

“The efforts have reduced the cost of living and created vibrancy in the economy that has shown signs of strong recovery,” he said.

Some of these signs of recovery as highlighted by Ruto in his Wednesday speech include the strengthening of the Kenyan shilling against the US dollar, reduced inflation to the current 5.1 per cent and payment of the Sh260 ($2 billion) Eurobond debt.

Yet it seems these gains have not touched the intended hustlers who have been the target of this administration through Beta.

In the PBO report, such a drastic cut in funding, and as a result of a revolt was not envisioned. The most envisioned was the fiscal consolidation efforts being implemented by the government itself.

“The proposed fiscal consolidation plan is laudable, however, cutting expenditure in the existing fiscal framework while accommodating the cost of implementing the manifesto proposals may prove an arduous task,” reads the report.

Fiscal consolidation

Apart from fiscal consolidation, financing the agenda is the other challenge as the plan proposes to halt commercial borrowing, ="https://www.standardmedia.co.ke/sports/amp/financial-standard/2001497781/the-big-ask-inside-treasurys-unlikely-plan-to-lower-gaping-budget-deficit">reduce domestic debt< and capitalise on concessional financing.

“Given the cost implication for the agenda in the aforementioned costing scenarios, overreliance on concessional financing may not be achievable in the short-run due to volatility of concessional financing and the time required to negotiate the same,” says the PBO report.

These financing hiccups, enhanced by citizens’ revolt, could be the tell-tale signs that the Beta strategy may need a review for the government to meet its priorities.

The question is which strategy it will employ going forward given that bottom-up economics seems to have fallen out of favour with the majority of hustlers it was created for.

Bottom-up economics, which is the favoured development strategy for NGOs and civil societies, has severally been criticised by experts who opine that neither this strategy nor the trickle-down or top-down economics, synonymous with capitalists, can achieve development.

Bishwapriya Sanyal from Massachusetts Institute of Technology notes the same in a paper titled ‘The Myth of Development from Below’.

“Development requires a synergy between efforts made at the top and the bottom, a collaborative effort among the government, market institutions and NGOs which utilises the comparative advantage of each type of institution, and minimises their comparative disadvantages,” he says in the paper.

Another paper published in 2020 in the Journal of Asian Social Science Research also has the same opinion.

The paper by Shahidulla Kaiser from the University of Chittagong states that top down approaches are not always synonymous with failure nor are bottom-up approaches always successful.

“Top-down efforts of development have failed to bring significant changes in the lives of the poor compared to the time and money spent over the decades.

“Likewise, bottom-up institutions like Non-Governmental Organisations and civil society organizations are not successful in all parts of the world like in Africa,” reads the paper.

It adds that both types of development approaches are needed to tackle poverty and it is possible for “coexistence and continuity” of both development efforts as we have seen in earlier years.

“Development is a multidimensional process that has social, political, or economic aspects. Hence, development efforts should be carried out in all parts of society for greater benefit,” Kaiser says in the paper.

“To do this, we need to use both top-down and bottom-up approaches to ‘promote interaction and dialogue among all levels’. No single development effort, either top-down or bottom-up, is effective in the long run.”

The reason behind the Beta agenda, as severally explained by the President and his top economist Prof Ndung’u, is informed by the collapsed markets and debt burden the country is in.

“This institutional failure problem pushed policy and markets to fail. In this context, Beta interventions at the bottom of the pyramid are targeted to ensure that markets are properly governed to work for everybody and especially the poor,” the CS said while presenting the budget statement mid this month.