A Kenyan Story: High Cost of Living and High Taxes
The question that lingers in every Kenyan mind is whether the president has an acute awareness of his policies and whether he is apprehensive of the social welfare of the people. Was his vows a ploy to mask his narcissism; an incontestable approach towards his policies and ideologies? Did he have the vision of creating an industrial revolution or building a personal legacy, was the hustler narrative a belief in individualism and national unity? As it stands, he falls under the category of just another African president. Someone who became what he hated.
From a political standpoint, the bond market is a proxy of the government’s credibility on both fiscal and monetary policies. The bond market is really important, most pensions and insurance funds are invested in government securities because governments are regarded as reliable borrowers. A large part of the money we put aside for retirement, insurance premiums, saccos, and bank deposits are invested in government securities.
Currently, the Kenyan government is drowning in debt and struggling to service its debt, it is also faced with aggravated citizens who have lost faith in the government. Despite the current government promising to cut spending and borrowing, it has increased its expenditure and also shifted to domestic borrowing which is inconsiderably not safer per se compared to external financing. Approximately 50% of Kenya’s debt is borrowed locally. Kenyan banks carry slightly over one-fifth of Kenya’s total debt stock and about half of the country’s domestic debt. Additionally, we have insurance and pension funds that majorly serve state employees.
We can all agree the government is contemplating defaulting on some of its obligations as it struggles to cover the expenses. Learning what happened in Ghana, where when the government became suffocated with debt obligations, this resulted in restructuring and haircutting its domestic debt, pushing maturing and restructuring coupon payments on the bonds. The ripple of such an event will cripple an already ailing Kenyan economy. We stand the risk of an economic crash, sanctions, and imposition of financial control of the country, in the event of sovereign default. However, defaulting on debt is relatively less painful when you have a significant portion of foreign bondholders. Domestic creditors suffer fewer losses hence less distress to other parts of the economy. The world bank has already listed the Kenyan bank system among the three facing high exposure to sovereign debt caused by debt distress.
Aggressive domestic borrowing stifles the private sector. Most banks and funds are now shifting to government bonds due to the high returns offered. The current interest on one year T-bill is +12%, the benchmark for other lenders. The high rates are stifling the private sector. Banks are allocating more funds to government securities due to high returns, which leaves the private sector scrambling for limited expensive loans. Keep in mind, the private sector drives the economy and is the biggest provider of tax revenue. The high cost of capital and high taxation is a doubled-edge sword that will quickly kill our fragile economy. All the burden ends up with the consumer. This is just one of the policies raising eyebrows, topped by a highly opposed financial bill.
The government seems to be callous in its economic policies and incognizant of the social welfare of its citizens. Its policies and praxis towards the political unrest should reflect a dedication to the working class and an urgency to improve the cost of living. As it stands, it is plausible that most of the economic policies are used as weapons for class wars. Policies aimed at paralyzing a targeted class. Pushing for privatization, deregulation, free trade, and monetarism on the pretense of individualism — a political playbook historically used to reclaim power after the domination of social democracy in Europe.
Neoliberalism, an economic philosophy turned into a social ideology propaganda. A theory that claims self-determination and individual empowerment as a hustler transforms into a prosperous nation. As good as it sounds, it also implies people have to help themselves without government assistance, and in such governments, policies are upheld regardless of the interests of the working class. Is the president ready to be subservient to the working class? Kenyans don’t deserve to be in such political vicissitude, especially in such a fragile economy. Kenyans are standing in the middle of a class war. The new kids on the block, eager to stamp authority, establish political and economic dominance, and amass their deserved share of power, versus a relentless, ego-bruised opposition led by dynasties, who feel threatened and won’t jeopardize their status.
