Former National Treasury Cabinet Secretary (CS) Prof. Njuguna Ndung’u has explained two things that led to the rise in the cost of living and resulted in high taxation.
Speaking during a handover ceremony, Njuguna told his successor CS John Mbadi that the Ministry struggled to sustain stability in the economy over the last 22 months.
“In the last 22 months the Treasury struggled to sustain stability in the economy due to layers of persistent shock and they were also negative and persistent. There were also inconsistencies in terms of police,” he said.
He stated that the high cost of living and high taxation debate are just symptoms of two facts in the country i.e. poverty and unemployment.
“First poverty and inequality, after layers of negative shocks have persisted. What we hear is not actually cost of living or taxation, it is actually poverty that has hit the country so hard after so many layers of negative shocks. The second fact is unemployment, especially among the youth,” Njuguna said.
Govt Interventions
He explained that the government worked on production and productivity in food production sites leading to decline in food prices.
Additionally, Njuguna said the government created and developed the G-to-G petroleum product purchases during the global dollar shortage period and fuel prices declined.
“That is why I was defending this very much because I knew the results. Since we managed G-to-G there is no oil importing company that has gone to commercial banks to buy dollars,” he said.
“So, the success is not to be seen as declining fuel prices but actually creating a different market for foreign exchange depending on the foreign exchange buying at the rerail level was creating a distortion in the market.”
Also Read: John Mbadi Softens Stance on Finance Bill, Hints at Bringing Back its Provisions
Debt Levels & Burdens
However, the former CS said Kenya’s debt levels and debt burdens cannot be sustained by the current revenue.
Njuguna said the Treasury must deal with the pattern of expenditures to sustain the debts burden.
“Total revenue stands at about 16.5% of GDP and target for 2024 was actually 18.6% with the Finance Bill that is not there. So, it means that those revenues may not be realized,” he said.
“The second thing is that expenditure range around 22.1%, so you can see the gap. From the word go you are already set to have a fiscal gap.”
Also Read: John Mbadi Explains Connection Between Ruto’s Bottom Up and ODM Manifesto
How Treasury Can Address Liquidity Challenge
Njuguna said the short-term debts, especially bills and bonds, have created a massive liquidity challenge in the country.
He revealed that the Treasury took up to three weeks to clear payrolls because of the liquidity challenge.
“This is not a solvency problem, but what I would encourage Mbadi is that this liquidity constraints requires strategic options to avoid them creating a solvency challenge. This requires a very strong signaling approach,” he said.
Follow our WhatsApp Channel for real-time news updates!
https://whatsapp.com/channel/0029VaB3k54HltYFiQ1f2i2C
