The economy is on a drip, unstable. The prognosis isn’t rosy. The macro-economic indicators are headed south.
Interest rates are up, even for the premium Treasury instruments, at 16 per cent. The shilling is on a free-fall, with businesses buying US dollars for imports at an average of Sh156.
Inflation, driven by non-food items, is up. Our trade imbalance trend is hugely negative as imports exceed exports three times.
Demand for goods and services is subdued as purchasing power is eroded.
Unemployment is the highest in the region as businesses continue to shed jobs.
The high cost of living has defiled our dignity, and the nation, including government, is hooked on loans.
Government loans hover around Sh 11 trillion. Commercial banks lending is around Sh4 trillion. Digital lenders such as Fuliza paid out nearly Sh1 trillion last year!
But the public debt remains the elephant in the room, driving the state’s high taxes policy, enhanced exchange rate risks and the high interest rates.
Global increases in prices of raw materials, including oil, disruption of food supply chains and high inflation mitigation measures have exacerbated the situation.
The high cost of energy and high taxes have all contributed significantly to the worsening business environment in the country, which together with other constants, such as corruption and poor governance, have eroded our competitiveness in the region.
The Kenya Kwanza administration has placed tax collection as its priority, arguing that it will have more money to repay the public debt, and invest more in development.
A cardinal rule during an economic decline is do not raise taxes.
Employers struggle to keep their business in operation and pay their employees. Individuals are concerned about loss of income.
When the economy is struggling, you cut taxes; when it’s booming, you raise them. More taxes will only increase the cost of living, and worsen the poor business environment.
I also believe the decision to tax Kenyans to fund construction of housing is misplaced. It will be foolhardy to suggest the government will efficiently absorb over Sh 300 billion the fund will raise over the next three years.
Government should have used policy to incentivise the private sector to do so.
Abridged version of Kerrow’s submission to NADCO