This archive report was first published on 24 November 2019.
President Uhuru Kenyatta's government is facing intense pressure to resolve a cash crisis that has left many businesses struggling. The crisis has led to a surge in bad loans, with the ratio of bad loans to total loans increasing from 4.7% in December 2012 to 12.5% currently.
According to the Kenya Revenue Authority (KRA), the government hopes to pump at least Sh165 billion into the economy, mostly in the form of pending bills and tax refunds, which should improve the cash flow among individuals and businesses.
Acting Treasury CS Ukur Yatani has issued an ultimatum to State corporations and county governments to pay suppliers close to Sh137 billion by December 1. Failure to do so will result in 15 counties not receiving their conditional grants and 53 State corporations not getting their allocations for the current financial year.
Yatani has also acknowledged the need to reduce the tax-load for small businesses, saying that the current tax regime is constraining them and leading to tax evasion. He has promised to release around Sh27 billion worth of tax refunds to businesses by April 2020.
Meanwhile, the government has implemented austerity measures, including cutting expenditure on non-essential items by half. This has led to the suspension of 'teas, snacks, water and personal expenditure' in some offices, including the University of Nairobi.
Energy Cabinet Secretary Charles Keter has said that the decision to get rid of tea was part of the austerity measures. Others that have not reduced their tea budgets have, however, slashed their travel, training and advertisement expenses.
Uhuru is said to have wondered why Kenyans are broke, setting off a series of high-level engagements between government leaders and their counterparts in the private sector. The government hopes that implementation of the austerity measures will release funds for critical development programmes, including the President's Big Four Agenda.
