How Government austerity measures could have negative impact on Wananchi

Some of the measures he announced include the dissolution of 47 State Corporations that have overlapping mandates, the stop in the funding of the offices of the First Lady, the Second Lady, and the office of the Spouse of the Prime Cabinet Secretary; the reduction of the number of advisers in the government by 50 per cent, scrapping of budgetary provisions for confidential budgets in various Executive offices among other measures.

The President also announced the establishment of a Task force to do a forensic audit on public debt. 

However the establishment of the Task force has now been temporarily suspended by the high court.

While the austerity measures are meant to reduce public expenditure, questions have been raised about what the consequent effect will be on wananchi.

During a Citizen Digital X Space held on Tuesday on austerity measures and their effect, Cuba Houghton, a programmes support and communications officer with the International Budget Partnership (IBP) warned, that while there may be positive effects in the long-run, there may be negative effects felt by wananchi in the short-term.

“There is a human side to austerity measures and in the short term, there are several adverse effects that can be outcomes of austerity. This goes beyond Kenya,” he said.

“If you look at how structural adjustment programs have been implemented and the impacts, in other countries you can also see that it's been negative.”

Houghton went on to give the example of El Salvador.

“As part of their structural adjustment program, they had to privatize some of their state corporations. And the one that they ended up privatizing, for example, was the energy distribution. So for us, it would be Kenya Power. What happened is that eventually, that raised money for the government because of the privatization, so it was essentially sold off. However, there was no service delivery benefit. The services didn't improve. And in fact, what happened is that the cost of services, especially for the poor and vulnerable, went up because the companies spiked the prices. And then the government had to end up spending money on subsidizing the cost of electricity because, these companies hiked the prices. So in order to make it more affordable, the government had to spend more, you know.”

Houghton went ahead to give examples how structural adjustment programmes also had reverse effects in other countries, including in the Philippines, Zimbabwe, and Mexico, where the programs resulted in a decrease in health and education spending over time. 

“There was one year in Mexico that spending on education fell by 40  percent. So it's important to consider the potential negative effects. One of the most intense austerity programs we've seen is happening in Argentina where the new president and administration have decided to implement a series of deep reforms, because Argentina's economy has been struggling. Among those is the devaluation of its currency by more than 50%. And what that's done is raise the cost of living and food and gas by more than double.”

In conclusion, Houghton said that in the long term, there are benefits of expenditure rationalization, but it's important to be careful about how it is done.

“Are we going to sacrifice certain specific social services in pursuit of that vision? Are we going to instead cut down on wasteful expenditure and the expenditure that we see overlapped in the budget.”

Listen to Citizen Digital X Spaces here.