Whereas Kenya still grapples with persistent fiscal deficits and burgeoning offshore debts, Singapore enjoys balanced budgets buoyed by a robust strategic fiscal policy.
The word Singapore is now synonymous with Kenya's quest for attaining high-income status. President William Ruto has consistently dissuaded Kenyans from thinking small, and asked them to instead boldly confront the challenges that have stunted our society's march to high-income status.
The Head of State strongly believes that all the characteristics that define "First World" societies, including advanced economies, high standards of living, political stability, and strong social indicators are within Kenya's reach in the next five to ten years. In terms of economic advancement, what the President is saying is that Kenya can attain a minimum Gross National Income (GNI) per capita of US$13935, being the World Bank generated lower threshold for a high-income economy, according to 2024 data.
A comparative figure for Kenya is US$2550 for the same period. Based on Kenya's current growth projections, it is estimated that the country could reach a high-income status by 2050, if the growth trajectory of about 5.1 per cent per annum is sustained.
President Ruto does not want to hear anything about 2050; he wants Kenya to be in the league of Singapore in 2030. Beyond the president's ambition, there needs to be real action to give it traction. It will take novel fiscal policy thinking and discipline to pull Kenya by its bootstraps out of lethargy, largesse and malfeasance that have characterised the country since independence.
But first, a quick recap of key characteristics of developed economies. High Gross Domestic Product (GDP) and GNI, which translate to a strong purchasing power, are key ingredients of high-income economies, as they guarantee producers of goods and services a ready market.
Technological infrastructure
Developed economies rank high on the United Nation's Human Development Index (HDI), which measures quality of life in terms of educational attainment (literacy rates and schooling), life expectancy, and overall standard of living.
These economies also tend to be highly diversified, with resilience that is buoyed by strong manufacturing, technology and services sectors. Besides, developed economies prioritise investments in well-developed physical and technological infrastructure, including efficient transportation networks, reliable and cost-effective energy systems, sanitation and widespread digital connectivity.
It is now long-established that stable democratic governance, the rule of law, zero-tolerance to corruption, and effective framework for public services delivery are hallmarks for predictable and attractive investment environments. High investments in Research and Development leads to significant technological innovation and a skilled workforce, leading to low rates of poverty and unemployment.
While there may exist relative poverty in these societies, extreme or absolute poverty is minimal. There is absolutely nothing in the books that is too hard for Kenya to surmount in its bid to attain a developed economy status within five or so years. Kenya's Achilles heel has always been its dual eyesore of corruption and tribalism.
These two vices have consistently ensured that large proportions of national budgets ended up either being misappropriated or directed to select projects that served the development needs of specific ethnic communities.
The result is lopsided development that has left untapped potential in some regions while disproportionate development resources have been heaped in preferred areas. The basis of this flawed development thinking was the now-infamous "Sessional Paper Number 10 of 1965: African Socialism and its Application to Planning in Kenya."
This policy document advocated for investments in "high potential" areas (read former White Highlands), and using the proceeds from such investments to bring up other areas. Unfortunately, colossal proceeds were reaped but never applied to those "other areas" as planned, resulting in little or no attention being paid to livestock, fisheries, mining or rangeland development.
Developed economy status
That myopic thinking denied Kenya a place at the table of high-income countries as its one-time peers like Singapore, Malaysia and South Korea delivered monumental feats for their citizens. Fortunately, the Kenya Government is already showing signs of commitment to transforming the country through such initiatives as the Bottom-Up Economic Transformation Agenda (BETA), which builds on the Kenya Vision 2030.
To facilitate the achievement of developed economy status, Kenya should relentlessly pursue impactful fiscal policies. A key priority should be to look inwards for domestic resource mobilisation in order to foster financial sustainability and sovereignty. The Kenya Revenue Authority (KRA) should endeavour to enhance tax efficiency and compliance in terms of taxpayer registration, filing, declaration and timely payment of taxes.
If achieved, this will improve equity in the tax system, reducing tax burden on compliant taxpayers and pushing down tax rates. With higher levels of compliance, more tax revenues will be realised to underwrite cost of the country's transformation.
Additionally, there is need for Kenya to create an environment that can attract huge amounts of private equity in the economy. The current fiscal model where revenue is collected, and about 70 per cent of it is utilised in public debt repayment, and only 30 per cent goes towards cost of governance and development, is not sustainable. While fiscal strategies such as National Infrastructure Fund and Sovereign Wealth Fund are novel, they are certainly inadequate.
The country requires to attract investors to grow at least 50 more companies of the size of Safaricom to generate enough revenue for fiscal sustainability, and reduce reliance on excessive offshore borrowing and taxation. However, this cannot be achieved unless Kenya rids its investment landscape of frequent fiscal policy changes, run-away rent-seeking and malfeasance, that creates uncertainty, and increases cost of doing business. Capital fears unpredictable investment destinations.
To create a strong foundation for economic activity, the country should prioritise investments in productive sectors such as infrastructure, ICT, financial services, agriculture, manufacturing, and tourism. Special attention should be paid to tax incentives to drive down production costs and improve quality in the agricultural and manufacturing sectors.
The objective is to shift the economy from dependence on primary commodities whose prices are heavily discounted in the world market, to semi-or-fully processed goods that can fetch better prices. Besides, there should be deliberate effort to significantly increase investments in education, research and scientific training, to create a pool of skilled workforce, and foster a culture of innovation.
The Gen Zs and younger generations of Kenyans are very enthusiastic about using the digital superhighway for socialising. The government should take advantage of this enthusiasm to support the development of the creative economy through appropriate fiscal policy. Last but not least, the government should strengthen governance and policy frameworks in order to promote transparency and rule of law.
In this regard, the government should enforce impartial implementation of strong anti-corruption measures, and support the Judiciary in oder to build investor confidence. In addition, the government should create a consistent framework for shared prosperity, to ensure all citizens benefit from growth, thereby reducing inequality and fostering social cohesion, which are vital ingredients for citizen support of government programmes.
There is light at the end of the tunnel. Attaining developed economy status is doable with the right vision and consistency to purpose. President William Ruto has unveiled his vision for a more prosperous and inclusive Kenya. Will he provide the Midas touch that has been lacking in Kenya's development conversations for the last six decades? Time will tell.
Follow our WhatsApp channel for breaking news updates and more stories like this.
Professor Ongore is a Public Finance and Corporate Governance Scholar based at the Technical University of Kenya. [email protected]
