Lowering the cost of living cannot happen in Kenya unless better fiscal and energy policies are crafted and the cost of energy is managed better.
Fiscal policies influence the cost of living by managing taxation and government spending. Kenyans are hoping for the issue of taxation to be tackled better and the cost of essential goods to reduce for reduced household expenses.
People hope that price regulations can be effected, efficiency initiatives in government adopted, while effective public investments and debt management are done to help stabilise the economy and lower costs indirectly.
The dual challenges of mitigating the rising cost of living and addressing widespread dissatisfaction with the taxation system are compounded by the legal and economic uncertainties introduced by the recent court ruling on the Finance Act 2023.
This confluence of issues highlights the urgent need for a government approach that demonstrates genuine concern for the masses and ensures that policies are both effective and empathetic.
The cost of living in Kenya has been rising, with many Kenyans struggling to afford basic necessities. John Mbadi, the new Treasury CS, will be under some pressure to develop and implement policies that will alleviate these financial burdens.
Mbadi's task is not just to craft measures that address immediate economic challenges but also to ensure that these solutions do not disproportionately impact the lower and middle-income groups, who are already facing significant financial strain.
Kenyans will be expecting the government to demonstrate that it understands these challenges they face, and addresses the real-world impacts of inflation and rising costs on ordinary citizens.
At the same time, the taxation system has come under severe scrutiny. There is a prevalent perception that tax rates are excessively high, yet a large portion of the population remains outside the formal tax base. This mismatch exacerbates the government’s challenges in managing fiscal policy and undermines trust in the tax system.
Expanding the tax base is essential to increasing revenue and distributing the tax burden more fairly. Mbadi will have to find ways of expanding the tax net and not raising tax more.
This needs to be approached with sensitivity and fairness, ensuring that it does not unduly penalise those who are already struggling. The challenge now is how to make the tax system more inclusive and transparent, addressing public grievances and fostering a culture of trust and compliance.
The recent increase in youth activism in Kenya has highlighted these issues more clearly. Some young Kenyans, through their protests and calls for reforms, pointed out the gap between the tax burden and the perceived benefits of government policies.
This sentiment emphasises the importance for the government to not only focus on economic reforms but also to actively listen to and engage with the younger generation. Mbadi can win the hearts of young Kenyans through crafting economic policy that benefits them practically. Showing genuine concern for the needs and aspirations of the public will be essential to rebuilding trust and ensuring that policies align with the expectations of the people.
Moreover, recent policy decisions adopted after 2022 are widely believed to have failed to stimulate economic growth as intended. Instead, some measures have introduced additional complexities and compliance costs, creating obstacles for businesses and households.
This situation reveals the need for a thorough review and recalibration of recent policies to ensure they are conducive to fostering economic development rather than impeding it. The government must show a proactive approach in revising policies that do not align with the goals of sustainable growth and economic stability.
Adding to the complexity is the recent ruling by Kenya’s Court of Appeal, which has suspended the implementation of the Finance Act 2023. This Act, intended to introduce vital fiscal reforms, now faces delays and uncertainty.
For John Mbadi, this legal setback presents a substantial challenge as it has created a vacuum in the government's economic strategy and stands to impede progress. This must bring out Mbadi’s best ideas if the government is to navigate these challenges with agility and transparency. These legal and economic obstacles have to be smartly and strategically addressed because they can hinder effective policy implementation.
In the realm of energy costs, which are a significant component of living expenses, CS Opiyo Wandayi’s role is critical. Managing these costs effectively is essential to maintaining economic stability and public satisfaction. Wandayi faces the challenge of balancing energy prices with the need for sustainable practices and investments in renewable energy. The government must show that it is addressing these issues with both efficiency and empathy, understanding their impact on the everyday lives of Kenyans.
Kenya’s need to explore domestic solutions to reduce external borrowing has become increasingly urgent. The current administration has made strides in this area, recognising the importance of fostering domestic revenue streams and reducing reliance on external debt.
Tax compliance and new revenue sources can help Kenya build a more resilient economy and mitigate the risks associated with external borrowing. The President has been keen on this and the new team will be expected to help this happen with effective policy and a clear demonstration of concern for the long-term financial health of the nation and its citizens.
Reflecting on historical successes, the legacy of Prof Anyang' Nyong’o provides valuable insights. During his tenure as Minister for Planning and National Development in the Grand Coalition Government, Nyong’o championed the Constituency Development Fund (CDF), which decentralised development funding and empowered local communities.
This approach not only enhanced local governance but also demonstrated a model of policies that effectively addressed local needs. For John Mbadi and Opiyo Wandayi, this historical precedent underscores the importance of policies that empower and engage communities.
By drawing inspiration from Nyong’o’s radical achievements, they can enhance the effectiveness of their policies and ensure that they are aligned with the needs of Kenyans. If they succeed, Ruto’s radical changes in his Cabinet will be considered a master-stroke.
After all, the President is like a manager who requires everyone to put their best foot forward.