Kibaki’s Legacy: Booming Economy, Free Education

By MBUI WAGACHA

No interaction has had such a lasting impact on my career as that with the late President Mwai Kibaki, a sharp intellectual giant. Fusing academic rigor with political insights that transform broken economies, few economists navigate the journey with the ease that Kibaki did.

From the start, it moved from discredited demand-side palliatives to supply-side transformations and a belief in the abilities of Kenyans to solve their own problems and create wealth for themselves.

Always a man of few words who looked down on political rioters (remember his exasperation with characters he called kabisa homespun), we interacted twice in two important meetings and issues. First, on his battle to unravel the economic mess that was the legacy of the Nyayo era after 2002. Comes a moment, comes the man who in the 1970s had already distinguished himself as a minister exceptional finance.

President Kibaki began the turnaround by fixing a runaway banking system. He cut sky-high interest rates and rebuilt broken incomes, with strong skills at the Kenya Revenue Authority.

Second, he hired me, almost casually at one point while swirling his glass of beer at the Muthaiga Country Club, while I was drafting the CSP for Kenya’s 2005-2007 Country Strategy Paper as a consultant for the African development bank. He talked about the battle to get funding for the Thika highway, which I then included in the AfDB plan.

Kibaki was a keen listener and far more adept than any existing or aspiring ruler today on the economic issues at hand.

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He had called for rigorous analyzes of the crumbling public finances of the debt-ridden economy.

I presented a PowerPoint of a range of options and how to find a workable policy mix between fiscal and monetary aspects. The proposal was a sharp and innovative fiscal consolidation, cutting wasteful public spending but retaining growth-enhancing development spending while cutting interest rates by removing the feeding frenzy of liability-laden banks teeming with customer deposits but just sitting around getting high yields without a sweat. How? They fed on the government’s appetite for issuing treasury bills and bonds, crowding out private sector growth.

The public and private sectors were paying the price with astronomical interest rates and economic activity had fallen to a growth rate of 0.55% in 2002.

Economic growth

Kibaki teamed up with then finance minister David Mwiraria to revive the economy by removing the punch bowl from the banks. By January 2003, banks were peddling loans from kiosks on the streets, and alternative lending to the private sector had the economy humming towards an 8.4% growth rate by 2010.

Free primary education has enabled more than one million children to attend school, making Kenya’s skills capacity a major part of its development opportunities today.

Overall, development has resumed in all parts of the country, including the hitherto neglected and largely underdeveloped semi-arid or arid north.

Many sectors of the economy have recovered from the collapse.

A notable achievement was the Constituency Development Fund (CDF) introduced in 2003, designed to support development projects at the constituency level. This has reduced imbalances in regional development resulting from longstanding partisan politics. The CDF gave birth to the decentralized system of government in 2010.

And no one can deny the long-term impact of Kenya’s Vision 2030.

Kibaki also injected fiber optics unrivaled in the continent and launched the dream called Lapsset.

Civil service reform has incorporated new principles into government.

Thika highway is another story that almost got me fired from ADB, along with my manager. We persevered in a brazen geopolitical competition for project supplies, which veered east when there were keenly interested parties in the west.

Today, the project’s economic impact is a lesson in how targeted policy and interventions can trigger regions’ economic dynamism, turning dead capital into wealth.

May his soul rest in eternal peace.

Dr. Mbui Wagacha is a former Chief Economic Advisor, Executive Office of the President and Acting Chairman of the Central Bank of Kenya.

About Mark A. Tomlin

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