Musalia Mudavadi tells Kenyans to brace themselves for difficult economic times

Prime Cabinet Secretary (PCS), Musalia Mudavadi, has urged the people of Kenya to refrain from politicizing the Finance Bill 2023, emphasizing that it is a crucial step in rectifying the current state of the economy.

Mudavadi made these remarks while acknowledging the government's obligation to make difficult decisions, emphasizing that the process of remedying the economic situation will require time.

In his statement, Mudavadi stated, "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 stimulate economic growth."

These statements were made by Mudavadi during his attendance and participation in the 40th Annual Seminar for the Institute of Certified Public Accountants of Kenya (ICPAK), which took place in Mombasa.

Mudavadi called upon Kenyans to remain resolute, assuring them that the government is working tirelessly to rectify the hardships faced by the citizens.

"I have continuously cautioned Kenyans to brace themselves for difficult times now and in the near future. As a government, we do not wish to deceive and provide false hope and promises. I am being pragmatic, realistic, and forthright in my assessment that the revitalization of the economy will take at least two years or thereabout," he said.

Furthermore, Mudavadi expressed the government's commitment to resolving the loopholes and inefficiencies in procurement processes and procedures.

Regarding the Finance Bill 2023, he highlighted the proposal of fundamental measures aimed at addressing the bottlenecks that have plagued procurement processes, where items procured at low costs ultimately prove to be very expensive.

"We are working towards tightening the loose ends and sealing the loopholes in procurement processes and procedures. The Finance Bill 2023 is proposing some fundamental measures that will help in addressing the bottlenecks that have been riddled by outrageous procurement processes where what you think has been procured cheaply turns out to be very expensive in the long run," Mudavadi said.

Based on his prior experiences in government, Mudavadi emphasized the need to rectify the misconceptions surrounding Value Added Tax (VAT), suggesting that the Finance Bill 2023 should address this issue once and for all.

"The government has shifted its subsidy policy from consumption to production. The few beneficiaries on the consumption side are crying out loud. For the government, the principle of majority beneficiary applies, and through the Finance Bill, 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 will lower the cost of fertilizer, which will, in turn, lower the cost of production," Mudavadi said.

Acknowledging the current economic challenges, Mudavadi encouraged unity and collaboration in mitigating the dire situation, stating, "We all know things went bad before Kenya Kwanza took over and are still bad as we speak today. This experience should prompt us to work together to mitigate the dire situation."

Moreover, he emphasized that the government is employing all available measures to address the challenges and foster a resilient and inclusive economic recovery process.

Mudavadi assured Kenyans of the government's commitment to improving their lives.

"As a government, we are not neglecting our responsibilities. Prioritizing the lives and livelihoods of Kenyans above all else is our key priority," he said.

In defence of the government's decision to implement difficult yet strategic measures, Mudavadi stated that the Kenya Kwanza administration aims to tackle the problems rather than postpone them, unlike the previous regime.

"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, 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," he explained.

Despite the challenges, Mudavadi expressed hope and emphasized the need to work collectively for a better tomorrow and the revival of the economy.

"There is hope as no situation is permanent. We have to always work towards a better tomorrow. We have to work together to resuscitate the economy and mitigate the dire situation," the PCS said.

Mudavadi explained that the current state of the country necessitates the government's action to amend various laws related to taxes and duties, emphasizing that it is for the greater good of the nation.

He posed the question, "We are in a difficult position as a country. The government intends to raise about Sh60 to Sh70 billion from the 16 per cent VAT imposed on fuel and petroleum products. Where else, at this point, do we get the revenue now that the legroom for our external borrowing is largely constrained?"

Regarding the previous government's actions leading up to the 2022 general elections, Mudavadi criticized the introduction of fuel subsidies without disclosing the source of funding.

"They only hid themselves behind the pronouncement that VAT on fuel had decreased from 16 per cent to 8 per cent, which, in our view, was just postponing the problem," Mudavadi said.

Mudavadi emphasized the significance of addressing the country's tax debt, which currently stands at Sh1.5 trillion.

He highlighted the importance of increasing revenue generation for successful project implementation, lamenting the use of court processes by some tax players to delay payments to the tax authorities.

"Our tax debt portfolio stands at Sh1.5 trillion 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…How will we do project if we do not bring in more revenue as a country?" Mudavadi posed.

During the event, Mudavadi was accompanied by the Principal Secretary for the State Department for Legislation in the Office of the Prime Cabinet Secretary, Aurelia Rono.