It is going to be painful before it gets better, Mudavadi on governments’ tough decisions in fixing the economy
The Prime Cabinet Secretary Musalia Mudavadi has urged Kenyans to remain steadfast and focused as the government is burning the midnight oil to ensure it corrects the drain, pain and strain on the citizen’s livelihoods.
Mudavadi says it is going to be painful before it gets better as turning the economic fortunes of the current economic situation in the country is going to take at least two years or more to get Kenya out of the economic quagmire it is facing.
“I have continuously cautioned Kenyans to gird themselves for hard times now and in the near future. As government we don’t want to lie and give false hopes and promises. I am being pragmatic, realistic and forthright in my assessment that resuscitation of the economy will take at least two years or thereabout.” Said Mudavadi.
The Prime Cabinet Secretary who spoke in Mombasa where he graced the 40th Annual Seminar for the Institute of Certified Public Accountants of Kenya-ICPAK, has noted that Kenya’s dilapidated economic situation gives no room to lie on the reality at stake.
“We all know things went bad before Kenya Kwanza took over and are they are still bad as we speak today. This experience should prompt us to work together to mitigate the dire situation.” said Mudavadi.
“We are deploying all the measures within our power to address the challenges we face today to foster a resilient and inclusive economic recovery that protects. As government, we are not sleeping on the job. The commitment to prioritize the lives and livelihoods of Kenyans above all else is our key priority as government. added Mudavadi.
Mudavadi while addressing the accounting professions has defended the government’s move to take hard, painful but strategic measures and decisions as early as now saying, the Kenya Kwanza administration wants to pick-up the can that was kicked down the street early enough since the previous regime thrived in postponing a problem rather that curing the mess.
Mudavadi said part of what was an undertaking by the decisions made during the tenure of the previous administration on a basis of commission or omission, especially not subjecting themselves to prudent borrowing is has largely contributed to the current situation.
“I raised the red flag a few years ago, that the kind of borrowing we were subjecting ourselves in as a country was going to wreak havoc on our economic stability, and now it has come to pass since we are not sitting well, someone kicked the can down the road and waited to see who will be the first person to pick the can; and for sure as Kenya Kwanza administration, we have decided to pick the can early enough before it gets too late for us to fix the country’s economic base.” said Mudavadi.
“There is hope as no situation is permanent forever. We have to always work towards a better tomorrow, we have to work together in the resuscitation of the economy and mitigate the dire situation.” added Mudavadi.
Mudavadi seized the opportunity to enlighten Kenyans on the upcoming Finance Bill 2023 which he says has largely elicited and attracted heated discussions.
He says the discussion has turned into a monologue against the Finance Bill 2023 with some of the antagonistic individuals and groups politicizing the whole issue without stating the facts for Kenyans to understand what envisaged what is entailed in the bill and what will be the benefits that will come with its implementation and adoption.
“The government has taken a bold step towards broadening the tax base so that we increase what we collect locally as revenue. This is the only way we will be able to boost agricultural sector operations, enhance food production and create jobs for us to stir the economic growth.” said Mudavadi.
“We are also working towards tightening the loose ends and sealing the loop-holes in the procurement processes and procedures. The finance bill 2023 is proposing some fundamental measures that will help in addressing the bottle-necks that have been riddled by outrageous procurement processes where what you think has been procured cheaply turns to be very expensive in the long run.” added Mudavadi.
The one-time finance minister also used the opportunity to point out that from his previous experiences while in government, the issue of VALUE ADDED TAX was largely mis-conceptualized and it is time that the finance bill 2023 cures the problem once and for all.
“The Government has shifted its subsidy policy from consumption to production. Hence, the few beneficiaries on the consumption side are crying out loud. For the Government, the principle of majority beneficiary applies. Hence, through the Finance Bill, 2023, the Government proposes to provide exemptions under the VAT Act for fertilizers and inputs or raw materials locally purchased or imported by manufacturers of fertilizers. This shall lower the cost of fertilizer, which will in turn lower the cost of production for farmers.” Said Mudavadi.
“Agricultural pest control products, raw materials for manufacture of fertilizers and transport of sugar cane to millers, have been VAT exempted. This intervention aims to promote agriculture and enhance food security. We are therefore certain that the food-led inflation will be contained as the cost of basic commodities such as maize get lower.” added Mudavadi.
“Unga forms part of the staple food for many households in Kenya. The Government, through the Finance Bill, has allowed for the zero-rating of supply of maize, cassava, wheat or meslin and maize flour containing cassava flour under the VAT Act. This will allow Kenyans to access Unga at affordable prices.” He further stated in his statement.
Mudavadi explained that situation we are in as a country is what has necessitated the move taken by government in amending various laws relating to taxes and duties, clarifying that it is all for the good of the nation and its citizens.
“We are in a difficult position as a country. The government intends to raise about 60 to 70 billion Kenya shillings from the 16% VAT imposed on fuel and petroleum products. The reality of the matter is where else at this point to we get the revenue now that the legroom for our external borrowing is largely constrained.?” paused Mudavadi.
“The previous government in the run-up to the 2022 general elections introduced fuel subsidies. They never told Kenyans openly who was funding the subsidy, they only hid themselves to the pronouncement that VAT on fuel had gone down from 16% to 8% which according to us was just but postponing the problem.” said Mudavadi as he defended the government for taking a bold step at its early stages of its administration to take hard decisions for Kenyans to enjoy some sweetness through tax relief once things stabilize.
“Our tax debt portfolio stands at 1.5 trillion Kenya shillings as we speak. This is tax that has not been paid to KRA, now KRA is looking for it and some is tied in tribunal and court cases and some through other dispute resolution processes and mechanisms that have not been finalized. Now what we need to ask ourselves is when we say we want good roads, we want medicine in our hospitals, we want universal healthcare, we want to fund education programs, how will we do all these if we don’t bring in more revenue as a country?” asked Mudavadi.
He further said that some of the interventions within the Finance Bill 2023, reflect on curing the delays brought about by protracted court cases that hamper tax base growth.
“We have tax players who are constantly using court processes to buy time and delay remittances to the tax-man. They always ensure that their bargain about taxes moves to court. We have to cure this menace and ensure that everyone who is obliged and eligible to pay tax fulfils part of his obligation as stipulated under the law and as part of the constitutional undertaking as a responsible citizen” said Mudavadi.
Mudavadi said tax levels for now will be painful for government has no easy options since for government to run there must be a plan, a budget and a roadmap that will see to it that revenues are collected to help in the daily running of government operations and service delivery to the citizenry.
“We must walk this painful path together as Kenyans and rally behind the government in place for it means well for all Kenyans.” Said Mudavadi.
ICPAK is an Institution mandated to protect and uphold public interest as well as develop and regulate the accountancy profession in Kenya. It is a globally recognized professional accountancy institute boasting of a membership base of over 36,000 members.
The theme for this year’s ICPAK Annual Seminar is “Leading from the Front: Accounting Profession as a Catalyst for Economic Growth”.
Mudavadi was accompanied by the Principal Secretary for the State Department for Legislation in the Office of the Prime Cabinet Secretary Aurelio Rono.