A wander around the Nairobi County government offices recently reminded me just how poor and disjointed the service delivery of that entity is. To get a correct rates invoice often requires one to take in all the payment slips to be correctly posted. That is just one aspect of service delivery. The actual service delivery and record is chequered — except, maybe, in the clamping of vehicles!
Another fiscal red flag is that we often resort to borrowing expensively locally and internationally instead of going down the road of much cheaper concessional debt. One of the reasons local banks still make good money is, they have a large guaranteed borrower: The government. It borrows expensively, often locally, to plug its ever-recurrent deficits.
5.5 PER CENT
Take a look at the overall figure. Around 94 per cent of tax revenue goes into recurrent expenditure. Of this, 40 per cent pays salaries and wages and another 24 per cent goes toward debt servicing. As a result, development expenditure gets cut and cut even more.
Another area that needs to be questioned is the unrealistic, often delusional, forecasting of growth rates and revenues. The government tends to use figures projecting growth in excess of seven per cent when, in reality, we have been witnessing an average growth rate of around 5.5 per cent.
Realistic forecasts of revenue put the figure at around Sh1.60 trillion. The government is working on a basis of increasing this by over 20 per cent. This is clearly not going to happen unless a miracle happens.
Therefore, the government is going to fall well short of revenue versus expenditure, which means the axe will need to fall real hard and fast in several areas. Hence, delay in Sh200 billion pending bills and a cacophony of short-changed county governments.
The World Bank is being polite about the fiscal mess and dilemma. If radical surgery does not take place to remedy the growing maladies, then we are in for big trouble. The borrowing window is closing.
Mr Shaw is an economic and public policy analyst:email@example.com.