The four men tasked with healing the economy

THE DEBT PROBLEM

Mr Kenyatta says 2020 can be the best year for Kenya if all play their roles effectively.

“We continue to make progress in education, healthcare, food security and nutrition, infrastructure, renewable energy, defence and security, industrialisation and many others in addition to laying the foundation for enduring prosperity within a happier … Kenya,” he said in his New Year message.

The President added that while 2019 was not without challenges, the country can take pride in the extent to which progress was made towards attaining national aspirations as espoused in the Constitution, Vision 2030 and through the Big Four Agenda.

Mr Kenyatta admitted that all is not well. “There are those … who have had a difficult year … It is my hope that the New Year will usher in better days for all of us,” he said.

Mr Yatani has the task of correcting the mess left by the previous regime at the Treasury accused of doctoring budget books and pushing Kenya’s debt levels to dangerous territory.

In its latest Kenya Economic Update released in October 2019, the World Bank warned that with 43 per cent of the country’s domestic debt maturing in a year, the government could face challenges in rolling over such bonds in an environment of no interest rate caps, low subscription rates and exposure of commercial banks to these assets.

CREDIT RATING AT RISK

Mr Yatani has to work hard to fit in a ministry that is closely watched by the World Bank, the International Monetary Fund and dozens of multilateral lenders.

Top for him would be to deal with debt. One of his options is to seek cheaper concessional loans to help retire the more expensive and short-term commercial ones that have seen the country stare at a Sh1 trillion debt repayment burden this year.

He is between a rock and a hard place given that he will come face to face with the reality of Kenya’s debt burden amidst missing revenue targets.

Defaulting on loan repayment would expose the country to ridicule globally.

It would also result in downgrading of its credit ratings. Signs of distress in paying debt came to the surface last year when it emerged that Kenya had defaulted on a Sh500 million loan owed to a Belgian firm for a water project.

Credendo Export Credit Agency wrote to the Treasury demanding payment by November 1. It accused the government of failing to pay despite numerous reminders.

According to the World Bank, Kenya is spending up to 18 per cent of its tax revenue on interest on domestic loans, up from 16.3 per cent in 2016/17.

AUSTERITY MEASURES

The ratio of debt to GDP has also shot up from 59.1 per cent in 2017/18 to 62.3 per cent in 2018/19, racing towards levels that are fuelled by an insatiable appetite to plug the hole with fresh debt.

The bank recommends a 50 per cent ratio. The country has a Sh607.8 billion deficit on its Sh3.02 trillion budget. The deficit was Sh559 billion last year.

Mr Yatani is to implement the latest round of austerity measures that will put him on a collision path with State agencies.

The full import of his directive to suspend benchmarking and study tours should be felt this year.

He also cut government delegates for missions abroad to a maximum of four, restricted domestic air travel to economy class and slashed purchases of newspapers and furniture by 75 per cent.

How the CS handles these as he prepares yet another budget will show if he is the right man for the job.

Whereas the Treasury is in charge of the fiscal policy, Dr Njoroge handles the monetary policy.

Aggressive expansion of the fiscal stance of Kenya, which means increase in government expenditure, puts a strain on the monetary policy.

INTEREST RATES

Dr Njoroge will deal with this to an elevated scale as the government prepares to head out for a new round of borrowing.

Mr Yatani made this intention clear when he said the government would run broke if Senate blocked an increase of Kenya’s debt ceiling to Sh9 trillion.

Dr Njoroge will also be tasked with putting banks on a leash so that they do not go back to the era of expensive interest rates.

“CBK has secured commitments from banks that they will act responsibly … now that the interest rate caps have been repealed. Banks have no choice but to work for and with Kenyans,” the governor said.

His other task would be to control the government in the local domestic borrowing market to ensure it does not crowd out the private sector.

The effect of the 2019 currency demonetisation will also start being felt on the economy in 2020.

REVENUE HEADACHE

The taxman has one of the most difficult jobs. On one hand, Mr Mburu must find methods of meeting the ambitious targets thrown at him, but do that without hurting and disrupting industry.

Mr Mburu would be counting on his intelligence background to net tax evaders and take the war against the cheats to their doorsteps.

Last year, he became a nightmare for big taxpayers. His actions to close revenue leakages were described by some as weaponising tax collection.

If Mr Mburu continues missing revenue targets, the economy will suffer one way or the other since the government would be made to borrow more or cut back on key development expenditure.

It is near impossible to tamper with salaries and debt obligations that form the bulk of recurrent expenditure.