“Uhurunomics: A New Brand of Economics!” – Dr. XN Iraki.

Posted on January 15, 2012

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· SORRY: Posting for 15th January, 2012 was delayed due to some technical problems. Kindly, please bear with us.

· We go straight and listen to an article written by Dr. XN Iraki, Lecturer, University of Nairobi, School of Business (Standard, 8th November, 2011).

· XN Iraki said: “The choice of Uhuru Kenyatta, as Finance Minister in 2009 was surprising to most observers. After almost two years, he seems to have quietly built his own brand of economics, Uhurunomics. Uhuru took over from Kimunya after an interval with Michuki as acting Finance Minister. Let us have a glimpse of Uhurunomics. What does it constitute and what is its future?

· On appointment as Finance Minister, Uhuru boldly demanded that government officials discontinue using vehicles with engine capacity of over 1800 cc, a move aimed at curbing transportation costs. He seems to have largely succeeded, at least by the number of government officials riding in Passats today. With the rising petrol prices, he should take another bolder step; have the same officials driven in Probox or Vitz…

· Uhuru schooled in the US, and the influence of American economic stimulus programme: We never used to hear of that in Kenya before. President Obama also came up with an economic stimulus package to mitigate the effects of the economic meltdown in 2009. Uhuru, like Obama, were prescribing to ideas of John Maynard Keynes, one of the most influential economists of the last century…

· By initiating Government projects, you create demand in the economy that creates jobs; increase consumption and can lift the economy out of recession. The Uhurunomics stimulus package was constituency-based and involved recruitment of teachers, nurses and agriculture extension officers. The salaries these employees earned created demand for goods and services and more jobs through multiplier effect…

· Projects such as markets, jua kali sheds, computer labs, tree planting, and school centres of excellence were also funded in subsequent budgets to create further demand. Observers opine this programme, to some extent, cushioned the Kenyan economy against the twin tragedies of 2007 post-election violence and the economic meltdown of 2008…

· Uhuru also had to contend with teachers demand for higher salaries in 2009 (immediately he was appointed) and this year (2011). On both occasions, he satisfied the teachers’ unions who went to the bank smiling. He has turned his guns on the informal sector setting up an initial fund of Sh.3.8 billion to be loaned to small and medium enterprises through three banks (Equity, Co-operative and K-Rep)…

· It is hoped that this sector will someday produce the next generation of Kenyan multinational corporations…

· In public financial management reforms, the ministry of Finance has introduced Integrated Financial Management System, an application that combines budget preparation, budget execution, accounting, financial management and activities on a single integrated platform. The main objective is to ensure transparency, accountability through reliable financial reporting…

· Needless to say, he has not disappointed in the budgets he has presented…

· He has even solicited for views from Twitter and Facebook, probably in an attempt to link to the younger generation. I have heard him referred to as “kamwana” by his peers: A term meaning youngster…

· Uhuru’s baptism of fire came this year when inflation and a volatile exchange rate threatened to erode all the gains of Uhurunomics. Treasury and the Central Bank seems to have decided that inflation must be fought by all means leading to hikes in interest rates that can only compete with the highest during the early 1990s. With high interests, fewer loans will be dispersed leading to less money in circulation and by extension lowering inflation…

· The collateral damage of interest rate hikes is job losses, seen as a lesser evil in a country where unemployment rate is high and most jobs are in the informal sector…

· If the minister can stabilise the shilling, tame inflation and ensure that Kenya’s incursion into Somalia does not drain State coffers, and at the same time maintain a healthy economic growth, of minimum five per cent, we could suggest that Uhurunomics has come of age…

· He also has to deal with (the) 2012 election year. His greatest challenge is how to insulate the economy from the political activities that characterise election years (and) which tend to be inflationary as contestants outdo each other to win polls. No wonder there is a call (unlikely to be answered) to cap the amount of money one can spend in campaigning…

· Uhurunomics also has to navigate the Coalition partners and the new Constitution, which has changed not just the budgeting process but the way money is shared between the central government and the counties. Dr. XN Iraki has spoken loud and clear; and is spot on.

· NB: The shilling has (since) stabilised a great deal; inflation has also been tamed a great deal; and significantly fuel prices are coming down markedly, et cetera.

· Tellingly, the Deputy Prime Minister and Finance Minister Uhuru Kenyatta, in his New Year message to the great people of Kenya, had noted some of these improvements and, even, promised great positive changes, going foreward, saying “we must have concrete hope, for concrete solutions!” Nothing to add! Everything is in black and white. Alluta Continua.

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