As the country marked 100 days since the first case was reported earlier this week, the ravages of the pandemic on the economy became even more evident, with the man in charge of the country’s purse strings facing the litmus test on how he finances his Sh2.7 trillion budget plan.
This amid predictions that the impact of the virus might be worse than the depression of 2007/2008.
The World Bank has predicted that the economy is expected to post a growth of 1.5 per cent this year in the baseline scenario, with a potential downside scenario of a contraction to 1.0 per cent if Covid-19-related disruptions in economic activity last longer.
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But before coronavirus landed on Kenyan shores, Yatani appeared to have steadied the ship somewhat compared to his predecessor Henry Rotich, who was ignominiously hounded out of office amid graft allegations, in managing the country’s rising debt and government expenditure.
A keen look into the recently released National Government Budget Implementation Review Report by the Controller of Budget for the period between July last year and March this year shows much leaner spending in recurrent expenditure.
Yatani, who was poached from the Labour docket, has set his eyes on slashing the recurrent expenditure that stood out like a sore thumb in government spending.
During Rotich’s tenure, the government averaged Sh1.55 trillion in recurrent expenditure, translating to almost 60 per cent of the total budget.
But upon taking over at Treasury, Yatani announced austerity measures that among other things sought to reduce benchmarking trips by government officials outside the country.
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And these measures seem to have paid off, going by the Controller of Budget’s report.
Between July 2019 and March this year, the national government’s recurrent expenditure dropped from 66 per cent to 64 per cent.
As such, XN Iraki, an associate professor at the University of Nairobi’s School of Business, reckons that Yatani’s job was cut out the moment he took over at Treasury.
“He came into office, and he had to set some things straight; the recurrent expenditure was one of them. He had to set the ball rolling. The only thing we can give to him is that he brought some discipline in a previous notorious ministry,” said Prof Iraki.
According to the Controller of Budget Margaret Nyakang’o’s report, absorption of the 2019/20 financial year that ends this month, rose from Sh682.5 billion to Sh762.9 billion, a two per cent increase from 2018/2019 financial year under Rotich.
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But, according to some economists, his progress was hampered by the fact that half of his first year in office was in an acting capacity, and he could not, therefore, push for some policy shift in the ministry.
This has further been worsened by the coronavirus pandemic.
In his maiden budget speech, Yatani hinted that Treasury will be forced to borrow an additional Sh774 billion to plug the deficit in the budget.
The shortfall in the budget is the highest since 2017 when the State was forced to borrow to finance the standard gauge railway project.
But because of the impact of the pandemic to the economy, Iraki said Yatani has been left with no option but to borrow.
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“You can’t blame Yatani for borrowing during this pandemic period. Remember he has to find money to fund the stimulus package and the money to replace the tax relief he has started,” he said. And while it is still early, Iraki said his scorecard has been impressive so far.
“It is early to judge him now, but so far so good. A good time to judge him is after two continuous years in office with no unprecedented shocks to the economy like coronavirus.”
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