Billow Kerrow: Kenya's economic growth reliant on Ruto's fight against graft
The African Peer Review Mechanism (APRM) this week disagreed with Moody's positive rating on Kenya, terming it irresponsible after it revised Kenya's credit rating from negative to positive.
Is Kenya's economy improving or not? The African Peer Review Mechanism (APRM) this week disagreed with Moody's positive rating on Kenya, terming it irresponsible after it revised Kenya's credit rating from negative to positive, citing a potential ease in liquidity risks and improving debt affordability. Renowned economist and former Mandera Senator Billow Kerrow spoke to The Eastleigh Voice Reporter Barack Oduor on the state of Kenya's economy.
Q: There is a contention between Moody's and the African Peer Review Mechanism (APRM) on Kenya's true credit rating position. Where is the contention coming from? Is the economy improving or not?
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A: Moody's is a United States(US) institution and often it has been accused of using political expediency to determine their economic outlooks. For instance, when a country is politically incorrect it will get a negative rating but when it is politically correct it will receive a positive rating. Just like these other institutions like the World Bank and the International Monetary Fund (IMF) are being used by the US for their political purposes. So you find if you are in the good books of the US then the following day these institutions give you a clean bill of health and if you are on the wrong side then you receive a negative rating.
Moody's has been known to paint African countries in a negative light without really looking at the fundamentals of the economy and this happens quite often. For instance, when there is a small protest in Nairobi, they will immediately put a negative outlook yet in Western capitals, demonstrations happen frequently but they do not receive a negative or downgraded listing. This is the reason why I do not agree with them.
Q: Please expound on why you think the economy of the country is improving. What are the indicators?
A: The economy is looking upwards. Some of the macroeconomic indicators show that the economy is looking upwards. For example, I am in business and a couple of years ago we had serious problems with the exchange rate.
In the last two years, the biggest challenge was the foreign exchange rate. The shilling had gone to the lowest at Sh165 and Sh168 and in the last seven months, we have stabilised to Sh129 and Sh130. This is very critical especially when a country imports raw materials and relies on payment of external debts that are all affected by the exchange rate.
Another thing that has improved in the macroeconomic indicators has been inflation. Inflation has been a major challenge in many countries, including the western countries. After the Covid-19 pandemic, inflation has been the biggest challenge in many countries. That has also gone down significantly from a double-digit downwards. This is reflected in the way prices of some commodities have stabilized or have gone down, which is important.
Q: Why is this improvement not getting felt by ordinary citizens who are voicing their concerns over the high cost of living and unemployment?
A: Most indicators used to determine the improvement of an economy are those of modern economies whose statistics can be available and can be measured by the government. In a country like ours, 80 per cent of the economy is informal and the problem with an informal economy is that you quite often don't get measured in those statistics and so the figure of those positive indicators we are talking about will not be reflected.
Remember that the figures of the indicators also keep on changing and can sometimes be crystallised into businesses getting back on their feet. For instance, when you borrow money to start an investment and rates are high, many companies don't borrow and when the cost of doing business is high many companies find it not competitive to produce. So it sometimes takes time for these effects to trickle down and be felt by common mwanachi.
Q: You have been constantly advising the government against over-taxation. How can the government finance its operations if it doesn't tax its citizens?
A: We have always given alternatives to overtaxing. Why do you tax by the way? The government can raise revenue to run its operations. Part of the reason why the government cannot run its operations as it should is because of corruption. All past regimes, and even the one we have today have been saying that one-third of their money is lost in corruption, wastage and inefficiencies.
Imagine one-third of a budget is about a trillion shillings. What the government needs to do is curb all that wastage and reduce all that corruption because that is the only way they can have enough revenue to run their operations because they do not need to tax.
Another way to avoid overtaxing Kenyans is for the government to acknowledge that it has to allow the private sector to do certain things. Why would the government tax people money to build houses? We can give incentives to investors in the private sector to build houses.
There are many ways the government can incentivise the private sector to do some of those things and that is what we need to see.
Q: There has been concern that the government has over-borrowed and this is likely to hurt the country's economic growth. How can it avoid overborrowing?
A: What is borrowing? and what is debt? Debt is the deficit in the budget. Your budget is Sh4 trillion and your revenue is Sh2 trillion, this means you have a deficit of Sh2 trillion. You will have to find a way of financing this Sh2 trillion, and that is what is called borrowing.
We have said the government has to live within its means. There is no pride in running a huge budget because you want to set a record. This is what many countries do so that they do not get into a situation where they have to borrow. There are no two ways about it.
Q: Where are we getting it wrong in the war against corruption?
A: Many institutions have failed Kenyans in curbing corruption. The Judiciary, EACC and others have failed in dealing with the criminal aspect of corruption. I think what is more important is the political aspect. We only need political will because if the president says No! then everybody down will also say No. The moment you appoint someone who has been suspected or implicated, then everyone will take a cue from that and corruption will be trickling down.
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