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Revenue target of 12% unrealistic given 5.6% GDP growth, says economist McFie

Brian Murimi by Brian Murimi
June 13, 2024
in News
Reading Time: 2 mins read

Prominent Kenyan economist Dr. Jim McFie has raised concerns about the government’s ambitious revenue collection targets, arguing they are unrealistic and disproportionate to the country’s economic growth.

McFie, a senior lecturer at Strathmore University’s business school, cautioned that the proposed 12% increase in revenue collection for the upcoming fiscal year is untenable given Kenya’s GDP growth rate of only 5.6% last year.

During an interview on the popular morning radio show “The Situation Room,” Dr. McFie questioned the logic behind the revenue targets, stating it would require taxing numerous sectors. “If the economy has grown by 5.6%, the amount of money has grown by 5.6%,” he said. “So, if you now say we want 12% more, you’ve got to start taxing a whole lot of things, and we just don’t realize in Kenya that we’ve got to live within our means.”

Dr. McFie criticized the budget-making process, which he believes wrongly focuses on increasing expenses rather than cutting spending. He recounted advising a company against its unrealistic 30% growth target, emphasizing the need to rein in expenditure instead.

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The economist also took aim at Kenya’s high production costs, citing examples from the agriculture sector where Kenyan farmers struggle to compete with cheaper imports from neighboring Uganda. He warned that the African Continental Free Trade Agreement could exacerbate this issue if Kenya fails to enhance its competitiveness.

Highlighting governance issues, Dr. McFie lamented the culture of overspending and lavish lifestyles among the elite, contrasting a young lady driving a gleaming Porsche Cayenne worth over KES 14 million with a central bank economist who still drives a modest car to avoid appearing ostensibly wealthy.

“We have to cut back on government expenditure,” Dr. McFie urged, decrying the KES 1.1 billion budget for upgrading the deputy president’s residence when the same amount could have built three major facilities at his university.

The economist’s remarks come as the auditor general has labeled the revenue proposals unrealistic, echoing his sentiments.

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Brian Murimi

Brian Murimi

Brian Murimi is a journalist with major interests in covering tech, corporates, startups and business news. When he's not writing, you can find him gaming, watching football or sipping a nice cup of tea. Send tips via bireri@thesharpdaily.com

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