It is not a secret anymore that the Kenyan Government, led by Uhuru Kenyatta and William Ruto, is swimming in a serious cash crisis.
Details have emerged that almost all ministries and County governments are piling up pressure on the treasury to release funds to pay angry workers. Even the Kenyan Parliament is also experiencing liquidity problems, where even Kenya Power was forced to cut off electricity supply to the building. The situation is so worse that even the usual tea, which the MPs enjoy, is no more.
Uhuru’s government has been accused of poor spending habits and lack of proper monetary policy to cushion the ever increasing interest rates and poor performance of the Kenyan Shilling against major currencies.
In 2014, the Government went for Eurobond which was meant to reduce the interest rates, prevent external borrowing and strengthen the performance of the shilling in the forex market. However, one year down the line, nothing has changed; in fact everything is becoming worse as the central Bank and Treasure run out of ideas.
We are in a situation where the country will not be allowed to borrow from traditional lenders because what Uhuru’s Government has borrowed has surpassed the borrowing ceiling. The Government has now resorted to borrowing from local banks with huge interest rates.
It’s increasingly becoming hard to sustain the wage bill, which the Government claims take up to 52 percent of the National budget. The creation of the 47 counties is straining the ailing government and there are suggestions that the country go into a referendum to reduce the counties from 47 to 24.
If nothing is done, then Kenyans will be forced to pay more taxes to cover the Sh 600 billion deficits the government is currently facing. This will come, particularly from Value Added Tax (VAT), which currently stands at 16 percent. The income tax and PAYE may not be spared either.
Kenyans should brace themselves for hard times ahead as the Government lay ground for the proposed new taxes. According to the treasury, the new VAT will be 22 percent up from 16 percent and PAYE is also expected to increase by 2 percent. The highest paid employee in Kenya pays a tax of 30 percent, meaning that those in this bracket will be deducted 32 percent from their gross salaries.