LIVING BEYOND YOUR MEANS-A CASE STUDY OF A BANANA REPUBLIC

So the government of Kenya has decided to implement the VAT Act and impose VAT on wide range of products previously exempt.This is despite a hue and cry from a cross section of citizens on the adverse effects of such a move.My people,this is just the beggining.Much is in the offing if the status quo continues.

 The government has a cash crunch.Plain and simple.In June a very ambitious "growth" budget was proposed by the central government.Not to be left behind,counties started to outdo each other with outlandish and unrealistic estimates of expenditure.What noone ever asked them is how they were going to fund the expenditure?Its not as if the government suddenly started laying golden eggs.(As a flashback we already slew the bird which used to lay the golden eggs in 2007,through sales of govt stake in cash cow firms).
So with a trillion shilling budget,one needs to ask,where do you fund it from?With no clue as to the most approriate way to fund,the easier answer was,taxation.Over the last decade there has been a consistent and unstoppable tax demand placed on Kenyans that its difficult to figure out for how long the trend would continue without it caving in.

To understand the current cash crunch in government one needs to have a flash back of the last ten years of economic growth.There wasn't anything magical in the growth,nor were there above average returns on any of the growth sectors.No new avenues to create economic growth has been found except the sale of government stake in all cash cow firms like Safaricom and Kengen.After the sales,the government was at least able to meet immediate short term needs of funding a bloated coalition government.Now few years down the line,the government is soooooo broke that it had to delay salaries of state workers for the month of July 2013.

There has been no move to address the concerns of the populace on the heavy taxation that we are forced on.The root cause of the heavy taxation is the increased spending due to double layer of government and legislative structures of the new Constitution,and an appetite to do things on a grand scale at all times,trying to outdo what the previous regime did.Prudence dictates that you do not live beyond your means and this is a lesson the regime is yet to learn.The state needs to reduce expenditure and look for avenues to increase economic growth rather than taxation.The government is in a catch 22 situation and more woes are bound to arise.

My crystal ball can see a looming sequel of delayed state workers salaries in September or October.Then the government will raid the local banks and result in an increase in interest rates above 30%,and an economy on the verge of collapse.We shall be forced to dig deeper and deeper into our tattered pockets.I can only hope that am wrong and that all this are just rants of an insomniac.