What State should do to ramp up economy
There are three ingredients the government ought to get right to ensure the economy gets a balance that can create the fiscal space necessary for growth.
First, the taxman has to get into those spaces that can enable him to increase tax collection without burdening the current taxpayers. This will ensure that the taxman collects sufficient revenue to fund the national Budget without too much borrowing. Over the next two years, the taxman should be able to grow revenues from the current Sh2 trillion to Sh3 trillion to ease debt pressure. This ambition will require tax reform measures that could see every Kenyan above 18 years enter the tax bracket using technology.
Secondly, the government will need to be more prudent in its expenditure to ensure fiscal discipline. This can include suspending proposed development projects and reviewing the budgets for existing ones. Completing existing projects, particularly roads, should however be prioritised to ensure they start giving value to the public.
Enforcing fiscal discipline and prioritising development spending will help the government to borrow less. If the government manages its appetite for domestic borrowing, there will also be more money for banks to lend to the private sector, which will boost the economy.
The third and most important ingredient is a presidential pronouncement on pilferage of public resources. While we can not ascertain that the last government was losing Sh2 billion a day as the then President Uhuru Kenyatta once said, what is known is that the country ranks worse than average in almost every dimension of corruption, according to a World Bank diagnostic report.
For example, Kenya ranked 124 out of 180 countries in the Corruption Perceptions Index 2020 released by Transparency International. That is why Kenya must start a serious talk on how to ringfence taxpayers’ money from pilferage.
This will also call for a major shift in civil service mindset if the new administration is to succeed in turning around the economy. However, the government must not forget that it is not running a business but a country. Its work is to invest in public goods, not to make money or scrimp when handling some expenditure.
The point is for it to create an opportunity for the economy to expand and create room for all sectors to thrive, bearing in mind that the more people there are paying taxes, the better it will be for government. As such it must do all in its power to keep those already in employment in their jobs while creating opportunities for new entrants.
