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November 25, 2020

Africa

KENYA: Political incentives remain juxtaposed to budget consolidation

BY Malte Liewerscheidt

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  • Controversial constitutional amendments proffered with the Building Bridges Initiative (BBI) will necessitate a public referendum by mid-2021.
  • The referendum will effectively be a high-stakes test-run for the presidential election slated for August 2022.
  • The political elite’s preoccupation with electioneering for the next 2.5 years will provide little incentive to rein in public spending in the meantime, notwithstanding a planned USD 2.3bn deal with the International Monetary Fund (IMF).

 

On 25 November, President Uhuru Kenyatta and opposition leader Raila Odinga jointly launched the collection of signatures to endorse the BBI. The event marks the beginning of a heated campaigning season set to culminate in a constitutional referendum by mid-2021, essentially providing a test run one year ahead of the August 2022 presidential election. The expansion of presidential powers proffered with the BBI, which Vice President William Ruto, as well as influential societal groups, have sharply criticized, suggests the process will entirely absorb the political class’s attention. This could be further reinforced if a pending court case decides that Kenyatta were to dissolve parliament over its failure to implement a gender parity rule contained in the 2010 constitution.

The high-stakes events on the political calendar strongly suggest that the next 2.5 years will not be about budget consolidation, even though agreement on a USD 2.3bn loan provided by the International Monetary Fund (IMF) seems imminent. Meanwhile, although dismissed by the treasury, local media speculation is intensifying that the government may soon apply for the G20’s Debt Service Suspension Initiative (DSSI) despite earlier claims to the contrary and may seek debt forgiveness from multi- and bilateral creditors.

BBI process drawing to a close

The public consultation process following the presentation of the draft BBI report in November 2019, long delayed as a result of the Covid-19 pandemic, finally drew to a close in October. The essence of the proposed changes to the constitution, most notably, the creation of the positions of prime minister and two deputies – all appointed by the president – and the official opposition leader, remains unchanged. However, amendments were made that would further strengthen presidential powers vis-à-vis, and oversight of, the judiciary. The creation of a judiciary ombudsman, appointed by the president and with a seat at the judicial service commission, is perceived as Kenyatta’s attempt to gain a degree of control over the courts, which nullified his 2017 first-round election victory in a landmark judgment.

The consolidation of presidential powers has drawn fierce criticism not only from Ruto, but also from influential civil society and religious leaders, with Kenya’s Catholic bishops warning of the creation of an “imperial” presidency. Nevertheless, Kenyatta and Odinga have ruled out further changes to the proposals. Instead, on 25 November, they introduced the consolidated BBI report as a draft bill and flagged off a one-month campaign to collect one million supporting signatures to be presented to the Independent Electoral and Boundaries Commission (IEBC).

Following the IEBC’s verification of the bill (around February 2021), it will need endorsements from at least 24 counties within three months. While there was speculation that proposed changes in the draft BBI report would be watered down during the subsequent consultation process to avoid a public referendum, the far-reaching changes in the final version foreclose this option.

As such, it seems Kenyatta and Odinga have embarked on a high-stakes gamble as the proposed expansion of presidential powers is unpopular, to begin with. Moreover, the likely timing of a costly referendum close to the next general election, in a context where the economy will still be suffering from the pandemic’s effects, will make many voters question whether the government has its priorities right. In turn, this will fuel the anti-establishment narrative pushed by Ruto, alleging that the BBI is about the elite Kenyatta, Odinga, and Moi families dividing up power as they fear losing influence after 2022, particularly if the vice-president were to win. The prospects of losing the referendum would be all the more precarious for Kenyatta as the current constitution does not allow the president to subsequently dismiss his vice president and other dissenting ministers, which was the option chosen by former president Mwai Kibaki after he lost a similar referendum in 2005.

To throw yet another potential bombshell into the mix, Kenyatta may soon be forced to dissolve parliament. In September, the chief justice advised the president to dissolve parliament over its failure to institute a gender parity rule as mandated in the 2010 constitution. While parliament has legally challenged the chief justice’s advice, if the high court dismisses the appeal, Kenyatta would have no choice but to dissolve both chambers and trigger legislative elections within 90 days. The case may drag on in court for a couple of months but may be up for decision around the time of the referendum.

Implications for public spending

All of the above strongly suggests that the political class will be consumed by electioneering between now and August 2022, rendering the prospects for consolidating deteriorating public finances over this timeframe virtually nil. The upcoming votes on the BBI proposals in the 47 County Assemblies will provide a first test case. Already, the assemblies have been promised additional constituency ward funds. While the counties are typically the first to see their allocations cut when government revenues dry up, taps are likely to remain open in the months to come.

Meanwhile, spending on Kenyatta’s ‘Big Four’ legacy agenda (food security, affordable housing, manufacturing, and universal healthcare) will be more important than ever to woo voters and may receive a boost via concessional funding from the World Bank. Against this background, while the IMF will certainly insist on a reform program in exchange for an Extended Credit Facility (ECF), which the IMF says could be approved as early as January 2021, the political timetable suggests there is a strong incentive on the Kenyan side to renege on any commitments to spending cuts.

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