To kick-start economy, pay pending

The government has been talking about economic recovery since it was elected into office. But it has completely missed the woods for the trees. Treasury Boss,  John Mbadi, economic recovery is hiding in plain sight, yet you keep ignoring it.

The national and county governments owe businesspeople an estimated Sh800 billion in pending bills. The individual amounts range from a few thousand to hundreds of millions. If the government paid this money, it would pump billions of shillings into the economy countrywide. This would kick off a series of cascading interconnected economic dynamics, operating almost simultaneously and feeding off each other, creating a huge groundswell of economic activity.

First, the government will immediately get back at least 16 per cent of this money in taxes. Second, the cascaded payment downstream by those receiving payments will provide further immediate tax collections. Third, millions of businesses that are either dead or on their deathbeds will immediately spring back to life. Fourth, there’ll be a huge splurge of consumer spending from repressed demand, and fifth, billions of bad and doubtful debts held by banks will be repaid. Lastly, it will restore the Government LPO, a paper whose credibility is in tatters! Businesspeople don’t want to do business anymore with both national and county governments.

Mbadi must realise that nobody believes anymore in his continued hackneyed pronouncements about how he intends to revive the economy. The economy is in a rut, and only shock therapy can kickstart it back to life.

When President Mwai Kibaki was confronted by the same challenge in 2008 after the post-election violence that killed off economic activity, he launched a massive economic stimulus programme countrywide. Within no time, the economy was humming strongly again, and he went on to finish his term very strongly economically.

Mbadi keeps crying there is no money to pay pending bills. This is nonsense. The government moved heaven and earth to pay the $2 Billion (Sh260 billion) Eurobond in one bullet payment in dollars to foreign creditors. It can move the same heaven and earth to pay the Sh800 billion it owes in shillings to domestic businesspeople. One can be forgiven for concluding that the government is reluctant to pay because, for whatever reason, it wants to keep its people impoverished.

Just mobilise funds locally. Talk to local banks. They will be eager to syndicate that money in a long-term bond. Indeed, they will be the biggest beneficiaries. One, it’s an excellent investment opportunity; two, it will make thousands of their clients creditworthy and viable borrowers again; and thirdly, they will dramatically improve profitability by reassigning the billions in provisions they have had to make for bad and doubtful debts. Indeed, a consortium of banks that were owned by Kenya Airways and the government found creative ways to secure their money and keep the airline flying. Finally, KQ has returned to profitability. The government also secured medical equipment for all counties where repayments were deducted at source. Nothing new here.

Once it mobilises the financing, the Treasury should establish a multiagency secretariat with the Council of Governors to handle all national and county government pending bills. All pending bills should be submitted to this secretariat within a limited timeframe. The work of this secretariat is simple: pay using the mobilised funds directly to the accounts of suppliers – no brokers, no facilitators, etc. – within a limited timeframe.

No more time should be wasted in useless verification that never ends. After all, Mbadi is on record stating that Sh2 billion is lost to corruption daily. If there is some hot air in the pending bills, this is the price to pay for getting the economy back on track. The country, and the government, are losing much more because of a moribund economy.

Mbadi, enough talk! It is time for audacious action to get the country out of the current morass. Tinkering around the edges as you are currently doing hoping for a miracle is foolhardy in the extreme. And time is running out!

— gathukara@gmail.com