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Back Yatani strategy to revive economy

Tuesday January 21 2020

EDITORIAL
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National Treasury Cabinet Secretary Ukur Yatani's plan to cut government spending and reduce debt is timely and has to be pursued vigorously. When he was appointed acting finance minister last year to succeed sacked Henry Rotich, who had been charged with corruption, the first undertaking was to cut budgets for non-essential items. He has since renewed that commitment as he launched the 2020/2021 budget preparation.

To this extent, the National Treasury proposes a reduced budget of Sh2.78 trillion, down from Sh2.87 trillion in the current financial year. Targeted for cuts are non-priority expenditures such as foreign travel, advertising and entertainment. This is a good start; the Treasury wants to match words with action as it recognises declining tax revenues and a sluggish economy.

However, the CS has to steel himself for stiff challenges. Past finance ministers who dared such moves found themselves capitulating as obstacles were placed in their path, forcing them to back off. Others started with aggression, but soon lost the psyche and dropped the ball. But there is no turning back. The situation is grave and quick solutions are acutely needed.

Financial discipline is paramount where cash earmarked for specific programmes or projects are squarely used for the purpose. Similarly, activities and projects have to be completed within budget and timelines to avoid delays that raise costs.

Since ascending to power in 2013, the Jubilee administration has earned itself the dubious distinction of profligate spending funded through insatiable borrowing, creating a huge debt burden. The country has a debt portfolio of Sh6.1 trillion, which is more than double the annual national budget.

The challenge with such a huge debt portfolio is that it crowds out cash for development because Treasury has to prioritise repayments, which ends up taking large portions of incomes collected through taxation. A cyclic situation is then created where the government has to continue borrowing to thrive.

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Matters have been made worse by the huge chunk of borrowed cash lost through corruption, pilferage and sheer wastage. Cases abound where borrowed money earmarked for capital development is entirely lost through corruption. In such cases, money is paid out for projects that never took off.

Mr Yatani has to deliver on the promise of better financial management by pushing through the inevitable drastic and painful budgetary reforms. We believe he best understands the environment he operates in and is ready to confront established systems and traditions. But he needs political will and technical support.

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