EDITORIAL: New strategy needed to fix financial crisis - Daily Nation

New strategy needed to fix financial crisis

Sunday September 9 2018

By EDITORIAL
More by this Author

The debate over the controversial high fuel prices masks a fundamental problem, namely, poor economic management and high level of indebtedness.

The government is facing serious financial crisis and is looking for all sorts of solutions to fix the deficit. Consequently, it has resorted to raiding the citizens’ pockets.

At the heart of all this is poor planning and, subsequently, poor decisions.

Tied to that is poor resource management, weak systems, theft and corruption.

Our argument is that the government should address the root cause of the problem and stop treating the symptoms.

GRAND PROJECTS

One of the defining characteristics of the current administration is compulsive obsession with grand projects.

For instance, the most outstanding project is the Standard Gauge Railway, which was completed on schedule and has remarkably transformed transportation between Mombasa to Nairobi.

However, there are serious economic questions about its viability.

Kenya had to borrow heavily to roll it out and in turn, will take years to pay back the loan.

Economists argue that the cost of the railway line and maintaining it is not commensurate with the incomes it will bring.

FOOD SECURITY

Several other grandiose projects have not been that successful.

An example is the multibillion Galana-Kulalu Irrigation Project that was intended to boost crop production and cut on the perennial food deficit that assails the nation.

Billions were sunk into the project with no returns. It now stands out as a white elephant.

Huge water projects started in arid and semi-arid lands to provide the commodity have not yielded results.

Social subsidy programmes such as youth and women empowerment funds, whose intention is quite noble, have turned out to be mere pipelines for stealing public resources.

PAY CUTS

Management of public resource is acutely wanting. In the early years of the administration, President Uhuru Kenyatta declared austerity measures to contain public spend.

For a start, he undertook a pay cut together with his deputy William Ruto and announced that all Cabinet secretaries, principal secretaries and other top government officials would do the same. Little has since been heard about that.

The baseline is that obsession with huge capital projects, poor financial management and corruption have led the country to the hole.

Raising taxes is not the solution. It is not sustainable. National Treasury chief Henry Rotich has to rethink the economic model to reverse the declines and debt burden.

For a start, cut all fanciful mega projects, institute drastic cost-cutting measures and seal loopholes for theft and corruption.