ODM leader Raila Odinga (left) and Deputy President William Ruto.
| File | Nation Media GroupPolitics
Premium
Where will money for welfare plans come from? Analysts ask Raila Odinga, William Ruto
Presidential hopefuls are announcing multi billion-shilling social welfare programmes whose funding will eventually be shouldered by the taxpayer as the 2022 election appears to be shaped by the economic revival agenda.
Analysts say most of the proposals lack solid funding plans, meaning the burden will fall on the ordinary Kenyan.
Just days ago, Orange Democratic Movement (ODM) leader Raila Odinga became the latest politician to provide insights into his economic model as he races to win the hearts and minds of voters at the bottom of the pyramid, to counter Deputy President William Ruto’s “bottom-up” model.
Mr Odinga says his government would pay Sh6,000 to at least two million poor families with no income every month.
This translates to a monthly bill of Sh12 billion and at least Sh144 billion every year. The figure is almost half what the Teachers Service Commission spends on salaries.
“We are going to bring change in our economy by looking at poor people. A family without an income will get Sh6,000 every month,” the ODM leader said.
It is also not clear how his administration would determine beneficiaries, given that more than 70 per cent of Kenya’s economy is informal.
Mr Odinga promises to protect Small and Medium sized Enterprises (SMEs) and the youth.
But it is the funding of these ambitious programmes that analysts are concerned about.
“Raila is looking at a basic income approach but the question is how he will finance it. Public workers salaries and the country’s debt repayment guzzle almost all revenue collected. How does his government intend to raise the Sh140 billion?” Mr Tony Watima, an economist, asked.
The ODM chief says his government would push ministries to slash their budgets by a quarter and the savings channelled to the social welfare programme.
He adds that fighting corruption would free up more resources needed for the scheme.
However, history shows that presidential candidates promise austerity measures, only to encounter stiff resistance once they form or join the government.
In the last six years, for instance, Jubilee and President Uhuru Kenyatta have promised austerity every year.
However, this has only remained on paper, given that the government has been reading an expansionary budget every financial year.
The political class is engaged in a battle to win the souls of motorcycle taxi riders, popularly known as boda boda, with incentives targeting this segment that employs hundreds of thousands of young people.
Mr Odinga promises to create the National Boda Boda Fund and a motorbike assembly unit to benefit 2.4 million riders.
Dr Ruto, who ignited the economic debate with his “bottom-up” model, has promised a Sh30 billion kitty to help the youth, mama mboga, boda boda and other “hustlers” .
The DP says his government would promote small scale trade through the National Government Constituency Development Fund.
He adds that every constituency would be given Sh100 million for loans to help micro enterprises and boost revenue generation.
Dr Ruto has aggressively marketed his “bottom up” model as being anchored on promoting investments and financial instruments targeting the millions of unemployed, “hustler” enterprises.
Mr Musalia Mudavadi’s “Uchumi Bora” model prioritises job creation, fighting corruption and reducing public debt.
The Amani National Congress (ANC) chief says his administration would restructure the ballooning public debt, weed out corruption and bureaucracy in government and generate enough funds to sustain and run the economy with as little borrowing as possible.
He says “Uchumi Bora” would work for all, “and will target clear, decisive and practical steps for accelerated economic recovery and revival to create jobs and opportunities for Kenyans”.
Poking holes in the DP’s bottom-up approach, the ANC leader says past policies adopted by the government were impractical and failed to cater for the needs of the majority.
“Some so-called models suggest a welfare state. Before you can think welfare, you must first build sovereign wealth. Unfortunately, those who put our people in this economic pit are throwing pieces of silver at them in the hole and telling them to get to the top,” he said.
“You cannot get out of the pit they threw you into to reach the top using the pieces of silver.”
On the country’s growing debt, Mr Mudavadi says he intends to restructure the loans and revise tax regimes to generate more money.
He pledges to ease pressure on small businesses that have been paying heavy duty for their products and operations.
Mr Watima says the best approach for any candidate who wants to provide access to capital is using established financial institutions.
He adds that lending money directly to the masses by the government would fail, adding that such approaches have not succeeded because of high default rates.
“The Youth Enterprise Development Fund and the Women Enterprise Fund have not worked. The biggest problem the country faces is high government borrowing. That has crowded out the private sector,” Mr Watima says.
“For sectors like boda boda and mama mboga, the government is better guarantee them instead of lending directly.”
Worse still, the promises appear far removed from the economic realities of the country, given that the biggest headache for the next government would be how to deal with the mountain of debt inherited.
In the current budget, for instance, Kenya’s public debt related expenses would consume Sh1.16 trillion, an increase of 21 per cent from the Sh958 billion allocation in the previous financial year.
National Treasury Cabinet Secretary, Ukur Yatani, has admitted that Kenya’s debt carrying capacity has declined despite the public loans remaining sustainable.
Mr Yatani says the deficit for the 2021/22 financial year is projected at Sh929.7 billion, equivalent to 7.5 per cent of GDP.
In this year, the government has outlined an expenditure and net lending of Sh3.03 trillion, and this excludes debt redemptions of Sh608.9 billion.
