Kenya’s new prime minister Raila Odinga has sharpened his calls for sweeping political reforms to safeguard the country’s poor, amid mounting disagreement over spending priorities for the nation.
In an exclusive interview with Emerging Markets ahead of this week’s African Development Bank annual meeting, Odinga said that a diminution of presidential power is key to implementing institutional reforms necessary for kick-starting Kenya’s stalled economic development agenda. “It’s very difficult to create institutions which are independent, if the president is above the law and not subject to scrutiny,” he said. “Once we resolve this, you can then create the independent institutions.”
But the prime minister’s bid to stamp his authority on the coalition government – in which he shares power with president Mwai Kibaki – is set for a challenge as the financial cost of two months’ political violence is tallied. The IMF estimates that Kenya’s GDP growth will fall from a projected 6.5% before the political crisis to 4% this year. Others predict a steeper drop.
Kenya’s reputation as a regional financial, manufacturing and tourism destination has survived the crisis, but policy-makers face a difficult year ahead as they face new demands on the fiscal accounts. Meanwhile a revised budget submitted on April 30 has undermined Odinga’s plans to tackle regional inequalities. Finance minister Amos Kimunya has said he may be forced to shift funding from vital programmes, such as resettling the several million displaced from the months of strife, to find $300 million to pay for the expanded coalition cabinet formed after a power-sharing deal.
But Odinga nevertheless insisted on a sweeping set of changes – including reform of the constitution, sharing of executive power, decentralization of political power and radical land reform – as a precondition for a pro-poor push. “Devolution of power is key to our policy,” Odinga said. “At the moment you find that everything is too centralized.”
He said his administration was committed to “transferring several functions that are performed by central government to the regional government.” Among them, he cited “basic education up to the secondary level, basic health, water, infrastructure, rural access roads, environmental issues. “There is too much discretion left to the bureaucrats in the Treasury who decide how much money is allocated, which roads will be built or which water or electricity projects are built,” he said.
The new government comprises a record 94 ministers and assistant ministers. Kenyan politicians are among the world’s best paid MPs – each taking home about $17,000 in salaries and allowances each month. Some 1,500 people died and another 600,000 were displaced during violence after the December poll.
The country’s sovereign ratings – B from S&P and B+ from Fitch – have slipped only marginally following the crisis. Analysts say the local economy will gradually bounce back but are less sanguine about the political outlook. They warn that advocates of a so-called “economy first” policy must realize that Kenya will not achieve sustainable economic growth without substantive improvements in governance.
“President Kibaki did not fail on the economic policy front, nor did his country lack international tourism and development aid. Rather he failed politically by not preventing massive corruption, ethnic favouritism and electoral malpractice,” said Larry Diamond, senior fellow at the Hoover Institution.
By contrast, Odinga’s plans for decentralization would entail a huge redistribution of political – and economic – power to the regions. “For all these areas we want to give funds to the regions,” Odinga said. Kenya is ranked 10th most unequal country in the world in terms of income distribution, according to Nairobi-based Society for International Development. The UNDP estimates that the top 10% of Kenyans control 42% of the country’s wealth; the bottom 10% own 0.76%.