Finance Bill puts Uhuru in a dilemma

Finance minister Uhuru Kenyatta is in a tight corner over proposed amendments to the Finance Bill, 2011.

MPs want him to approve amendments to the Bill, whose effect would be to limit the interest rates charged by banks to no more than four per cent above the official Central Bank base rate.

They also want banks forced to pay interest on deposits at a rate of at least 70 per cent of the Central Bank’s rate.

This is not something that Mr Kenyatta is willing to accept. He has put up a spirited fight, roping in Speaker Kenneth Marende to help him ward off the onslaught by MPs. (READ: Speaker gives bankers reprieve)

But the lawmakers, who, because like the rest of Kenyans, are also bogged down by the burden of bank loans, want the banks to lower interest rates.

The MPs have also trained their guns on laws that will in the end force the government to peg the fuel prices to a percentage of the price offered in the international market.

Hostility from House

Noting the hostility from the House, Mr Kenyatta rushed to President Kibaki and Prime Minister Raila Odinga, raised the matter in Cabinet, and asked for the support of the principals to rein in their troops. The Cabinet approved.

In a letter tabled in Parliament, the Head of Civil Service and Secretary to the Cabinet, Mr Francis Muthaura, said the proposed amendments were “suicidal” because they amounted to “interference” by lawmakers in the Finance Bill.

The role of the Finance Bill is to legalise the collection of taxes and duties, so that the government is able to marshal resources to manage the Sh1.15 trillion national budget.

“(If the amendments are approved) it would raise a public outcry, lead to hyper-inflation, and adversely affect the ongoing negotiations with the International Monetary Fund,” Mr Muthaura wrote in the letter dated December 6, sent to all ministers, their assistants and permanent secretaries.

The letter exposes the indecision in the Speaker’s ruling quashing the amendments, which he later upheld when he sat in the House Business Committee.

In it, Mr Muthaura had expressly asked the PM’s Office and the Vice-President Kalonzo Musyoka, as the Leader of Government Business, to “petition the Speaker ... to block the introduction of superfluous issues into the Finance Bill”.

The Cabinet order is that all ministers and their assistants should show up in Parliament to ensure that all the proposed amendments to the Finance Bill, apart from those sanctioned by The Treasury, are “defeated”.

Mr Kenyatta had got the requisite reaction from the Speaker. But then the House Business Committee, with substantial pressure from ODM Chief Whip Jakoyo Midiwo, overturned the ruling.

It is whispered in the corridors of Parliament that when the government-led House Business Committee okayed the amendments, the Finance minister vowed not to show up in Parliament to move the Motion.

The crucial Bill has to be approved and assented to in the next 15 days (before December 31). If that doesn’t happen, the tax cuts and raises that took effect in June, when the national budget was read, will become illegal.

The government will be forced to refund all the money and charge tax at last year’s rates. This means, the government may not have money to roll out projects as envisaged in the 2011/2012 budget.

And with the elections expected next year, this is not a prospect that the government can entertain.