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We have spent as though there’s no tomorrow, and we shall pay for it

Tuesday January 15 2013



I am not a pessimist, but I disagree when politicians make dishonest presentations of economic realities just to score propaganda points at political rallies.

When we conceal our economic problems, we distort discussions about the country’s future.

I don’t understand why politicians behave as if our Exchequer has all of a sudden become an inexhaustible source of money. Today, everything is about spending and more spending. We behave as if we have suddenly become a very rich country.

This is the mind-set that explains why MPs would have the temerity to award to themselves huge send-off packages without considering the economic consequences.

We, really, need to elect more economically-literate MPs. The attitude that our government has suddenly become so rich is partly responsible for the unprecedented spate of salary demands by public sector workers.

It also explains why everybody wants to spend big. In the last five years, Parliament has evolved into a huge monolith, gobbling billions of taxpayer money.

The Judiciary is also spending big. Currently, it is in the middle of rolling out the largest Capex programme in the history of its existence.

In future, we will pay very heavily for refusing to restructure our economy away from consumption – for not focusing on expenditure that supports actual production of goods and services.

Which brings me back to the subject of dishonest presentation of economic realities. As we head for the General Elections, government finances are in a parlous state. Revenue collection has fallen behind by a large margin.

Here are the facts as presented in Parliament by Finance minister Njeru Githae some three weeks ago in a document titled “A pre-election fiscal and economic update”.

As of November 12, 2012, revenue receipts were a massive Sh43 billion below target. VAT collection was Sh20 billion below target, while income tax had fallen behind by Sh9.3 billion.

On the other side of the coin, additional spending pressures have mounted almost to unbearable levels. Within this financial year, the government has had to raise an additional Sh30 billion to pay the salaries of teachers, university lecturers, nurses and police.

More spending pressures came from security operations in Somalia, the implementation of the Constitution, and preparation for elections.

We have borrowed massively. According to Mr Githae, the government had to borrow Sh6.6 billion from the international market for the biometric voter kits.

When the budget was presented to Parliament in June, the budget of the Independent Electoral and Boundaries Commission of Kenya was set at Sh17 billion. It has since had to be adjusted upwards to Sh26 billion.

As I write, the IEBC still has no budgetary allocation for conducting a run-off of presidential elections, just in case it happens.

Clearly, the numbers don’t look good at all. And, we still have to deal with how to finance the devolved government system. Indeed, devolution is going to exert the greatest pressure on government finances.

Having the counties to run their affairs without meddling by the centre is a very popular thing. But if you don’t get the public finance management system right, you are headed for chaos.

Regardless of what the Constitution says about the financial autonomy and independence of the county governments, we will still need somebody at the centre to ensure that budgets of counties are consistent with the economy’s targets for growth, the budget deficit, inflation, interest rates and national debt limits.

Counties must comply with national procurement regulations. And they will have to grapple with major capacity shortfalls especially in the areas of budget monitoring, procurement and internal auditing.

The Constitution has assigned counties many functions. But I am yet to see precise statistics on what each will cost.

What if what we give counties is not enough to fund the assigned responsibilities? Let us elect leaders who can demonstrate to us that they understand the economic challenges which the government is bound to confront immediately and in the future.