Paradox of a country where those in power don't listen to their own data

Days after I enrolled for a doctoral programme at the Central University of Finance and Economics (CUFE) in Beijing in the autumn of 2014, our assigned academic administrator told us something that I still vividly remember to date. His name was Liu, and he had invited us for a welcome lunch, being their first international students enrolled on a pure English-taught doctoral programme.

The year before, Beijing had opened the door for Chinese universities to start offering purely English-based degree programmes as part of China’s broader foreign policy on global positioning.

To quote his words, Liu said: “In this university, we believe anybody can cram and pass a written exam, but not everybody who can undertake high-quality research to earn a doctorate from our university”.

He then proceeded to explain the University’s bias towards specialised applied macroeconomic research. Regardless of your unique specialisation at the university, every graduate earns an economic degree at CUFE. Having had a stint at university-level teaching back home, his statement sounded quite elitist then.

However, the message was simple and clear. Even though we were required to undertake at least 12 units in advanced micro and macroeconomics, econometrics, corporate finance, international finance, economics and empirical modelling, any grades we scored in those courses would not matter at all in relation to the university’s decision to award any of us a doctoral degree. Only our research work and contributions to the body of knowledge would count.

It didn’t take long before Liu’s words became quite evident and practical in the classroom. The last hour for every single lecture that I ever attended at CUFE, the discussions always shifted into debates, theoretical contestations and their practical policy implications across different economies around the world.

We would reflect on the Western economic perspectives, the Soviet Union/Russian system of communism and draw comparisons with the Chinese variant of communism. On our assignments, we were mostly required to look at our home countries or regional economic blocs.

Simply put, no matter how technical the subject was, at the end of the lesson, we were required to translate the knowledge or evidence presented into its practical policy implications to individual economic units or at the macroeconomic level.

Unlike what happens around Nairobi policy speak, where policies and laws are mostly driven by emotions or private greed of those in power, the Chinese system is designed in such a way that no policy or law is passed without persuasive evidence and community-level public engagements on its implications to the Chinese people.

As I have indicated in a previous article, this approach to legislative and policymaking is founded on Deng Xiaoping’s metaphor of ‘crossing the river by touching the stones’. To steer China through the reforms of the 1970s/80s, he advocated for a cautious, pragmatic and experimental step-by-step policy implementation as opposed to blindly committing to large-scale, pre-defined plans.

This brings us to the primary question for this article: what evidence, if any, does the government of the day rely on for its fiscal policy choices?  

For context, this column has consistently argued against the flossy, debt-driven and foreign contractor model of development of the Uhuruto administration. Sympathisers of the regime argued that the ‘big-push’ projects will eventually attract economic activity around them or provide a visible legacy for President Uhuru Kenyatta.

However, it took former Central Bank Governor, Dr Patrick Njoroge, to make an outburst that people do not eat Gross Domestic Product and what he referred to as the Treasury’s abracadabra economics to jolt them from their bliss. The position of this column remains the same: big projects accompanied by a debt-voucher or whatever other jargon we call them today, padded with billions for looting and no accompanying local economic transmission, are at best empty monuments that only serve the individual greed of those in power.

As President William Ruto’s administration enters the final stretch to the next date with the electorate, we have gone a full cycle. The only difference now is that the regime is mortgaging every existing levy and weaponising financial engineering lingua like public-private partnerships and securitisation to cover up for the implied national debt burden or other direct costs to citizens like user fees/levies.

By design, the projects being launched all over remain vendor-driven, foreign contractor domiciled and opaque as to the true contractual obligations to the taxpayers. This is the same model that alienated former President Uhuru Kenyatta from the lived realities of the people. The political costs were not only heavy to his succession, but were evident to everyone with a basic sense to witness.

Before the current regime's apologetics throw stones at me, let us refer to a recently published report on poverty and the distributional impact of fiscal policies in Kenya. The study is published by the Kenya National Bureau of Statistics (KNBS), but conducted with other partners including Kenya Institute for Public Policy Research and Analysis (KIPPRA), World Bank, United Nations Children’s Fund and African Centre of Excellence for Inequality Research.

The study provides interesting findings that should prick the conscience of the powers that be and policy makers alike. The major finding is that while the fiscal system of the country has led to a reduction in inequalities, it has had a limited impact on poverty reduction. Further, the study established that the tax burden outweighs fiscal transfer benefits, with indirect taxes offsetting poverty reduction based on multiple simulations.

For President Ruto’s pet fertiliser subsidy programme, the study found that while it favours most income groups, it is less cost-effective and often benefits better-off households as opposed to the very poor. Direct cash-transfer programmes were found to be more cost-effective and to have better benefits transferred towards poverty alleviation. On gendered simulations, the study found poverty among children based on multidimensional measures beyond income to include health, education, water and sanitation and housing has increased since 2014.

Another interesting finding is that while economic growth has contributed to poverty reduction over the decades, the progress has slowed down in recent years and distribution uneven across demographics and regions. In rural areas, arid and semi-arid counties, female-headed households and children retain the highest poverty rates. Inclusivity in economic growth remained limited and explains the slow rate of poverty reduction.

According to this study, in spite of the lofty achievements leaders have been pontificating about in public speeches, the primary problems in the economy, including high unemployment, labour underutilisation and weak formal job creation remains unchanged. For example, the unemployment rate rose from 2.6 per cent in 2014 to 5.6 per cent in 2023. Further, despite a high labour force participation rate of 73.7 per cent in 2021, most employment remains informal and characterised by low productivity.

Finally, the study establishes that the fiscal space is constrained by rising public debt, increased interest costs, slow economic growth and persistent poverty. Based on this evidence, the study concludes that the country cannot achieve key Sustainable Development Goals of ending extreme or halving poverty, ensuring equal rights and access to resources for all by 2030.

Ladies and gentlemen, this is official evidence based on simulations using the most recent data. It is signed by Treasury Cabinet Secretary, John Mbadi, his Planning Principal Secretary, KNBS Director General and KIPRRA Executive Director.

Question is: Do these facts rhyme with what we are told in official speeches and ongoing campaign rallies christened “ukanguzi wa maendeleo”?