The muted holiday season spending by Kenyans is really an indicator that the economy needs some stimulation.
The impact of declining economic fortunes can be felt not only by supermarkets and other retail outlets, but also in corporate entities where earnings are lower or nonexistent with quite a number of them giving profit warnings for the year ending next week and announcing retrenchments.
While the removal of the interest rate cap is a good move and is bound to have a positive impact on the spending in the economy in the coming months, it is hardly enough.
For one, the cash is more likely to go into the upper and middle classes that have the wherewithal to take and repay personal and business loans. The common man is not likely to immediately begin borrowing without good earnings from their small businesses, agriculture or in their wages.
The single largest sector of the economy is agriculture, and that is precisely where the State should start to carry out stimulation. Constituting at least a quarter of the gross domestic product, putting cash in agriculture is certainly a sure way to ensure money reaches the majority of the population. That includes taking account of affordable inputs such as seeds and fertilisers and also ensuring that post-harvest losses are minimised. Extension officers that are currently employed by the county governments should give the necessary advice to farmers.
The other important thing for the economy to get back into shape is payment of the pending bills. The county governments stand accused of delaying payments, some for as long as three years. Indeed the outstanding amount is now in excess of Sh100 billion, which if paid, would amount to an immediate stimulation of the economy even without anything else being done.
The national government also has pending bills in billions of shillings. The advantage the central government has is that it can go to the financial markets and raise the cash from investors as long as it gives good interest rates.
If indeed that is the only way that the government can raise the money, then it should move quickly and do it, allot the county governments their share on the understanding that it will pay pending bills just as it (the State) settles similar bills its own part.