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Spending then borrowing will cost us

28 August 2013, 13:17 Paul Orodi

Kenya is ranked among the top spenders in terms of salaries and other allowances paid to state officers. Around the world, we rank higher than some of the most developed nations like Malaysia and Singapore.

The laws of finance are clear that one should check his spending and try as much to avoid debts. Finance gurus around the world will tell you point blank it is of no use to spend what you can invest and then go and borrow because you end up working for the debt over a period of time that is actually uncertain. It is uncertain due to the simple fact that the future has so many unknowns especially with regard to money which is the most volatile commodity.

Recently, the president made a visit to China and it was all over the media that trade deals worth 425 billion shillings have been signed. It is a great move by the young government and indeed such a colossal amount will off-set many projects across the country. Even though it will not complete all of them, it will set the pace for more funds to be injected.

However, looking at the other side, we have been tied up by a debt that we have no clear idea of the repayment period. With this kind of uncertainty and the volatility of funds across borders it might turn out to be a nasty deal if not carefully implemented.

The question that the economists and finance experts ought to have asked the president was; should we as your advisers look at other financing tactics instead of borrowing the whole amount? Looking around the country, it is possible to raise 425 billion over a period of five years and that would translate to no repayment of debt and no interest accrued.

Spreading the amount over a five year period, you will have 85 billion every year for the next five years. This is an achievable amount if we implement cost cutting techniques. To start off, the salaries of state officers and allowances of the very same officers need not be exorbitant as they are currently. They are not the only ones in need of the monies. As a country we all need the monies for development and other expenditures that will generate revenue for the whole nation.

When you cut down the salaries of Senators, Governors, MPs, Cabinet Secretaries and Principle Secretaries, Directors of parastatals and government agencies, Judicial officers and other high ranking members of the government you will have a huge amount saved. Instead of issuing numerous vehicles that gobble fuel in huge proportions we can have low-consumption vehicles being issued to state officers and use the saved monies to repair roads across the country to facilitate transportation of these individuals.

It is important that we check our spending if we are to achieve double digit growth. Only through austerity measures did the so-called Asian tigers emerge as developed economies. One cannot spend more than they generate and go ahead and borrow and then later expect to grow and transit to a developed economy.

Another very important fact is that correcting the balance of trade and balance of payment using tax codes will definitely slow development.

What is the need of a railway gauge levy when we can easily acquire that money by simply cutting down our extraneous spending? Our spending habits need to be tamed and we might just develop without the debts that are free flowing from the east in the name of new ties and bilateral agreements.

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