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KENYA FINANCIAL STATUS: Has Jubilee Government Made Us Poorer or Richer?

Elections are around the corner and it would be prudent for us to analyze what the Jubilee government has done for the country. We would endeavor to analyze the current economic status of the country and evaluate if we are better off or worse off. This may give an indication of future performance of the current government and enable us make rational decisions when executing our voting rights.

We would evaluate the country’s financial status in a simple understandable manner. No accounting background is needed here, just simple elementary mathematics of summing and subtracting. We would not indulge the financial scholars and examine complex terminologies like inflation, gross domestic product (GDP) and so forth.

First let us determine how we would simply evaluate our country’s financial status in the same way you evaluate your own financial status. The table below elaborates how we will go about it. You can replicate the same for your own financial status.

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Wealth Evaluation Parameters

Source: Kenya Brief Research

The following statements’ will hold true for every individual and country in reference to the above parameters.

Individual:

  • If your income > expenses, then you will be having a surplus and hence your wealth would be increasing.
  • If your income < expenses, then you will be having a deficit and you will need to borrow more to fund your expenditure hence increasing your liabilities. This scenario arises when you are living a life status beyond your means and is extremely dangerous.
  • If your assets > liabilities, your wealth would be increasing, your income would rise more than your expenses.
  • If your assets < liabilities, you will be getting poorer, your income would decrease and your expenses increase to fund the liabilities.

Country:

  • If revenue collected > recurring and development expenditure, then the country is getting richer, the vice versa also holds true.
  • If recurring expenditure > development expenditure, then the country is depleting future generation’s wealth and will get poorer over time, the vice versa also holds true.
  • If debt accumulation > development expenditure, the country is getting poorer while the vice versa means the country is getting richer.

NB: the above statements assume that finances spent on acquiring personal assets or on government development expenditure would yield income in the future.

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We can then formulate an equation that can evaluate if the country is poorer or richer in monetary terms. The equation would only evaluate monetary status but will not incorporate other aesthetic factors.

Personal Wealth = (Total Assets + Total Annual Income) – (Total Liabilities + Total Annual Expenses)

Country Wealth = (Total Annual Development Expenditure + Total Annual Revenue) – (Total Annual Debt Accumulation + Total Annual Recurring Expenditure)

Now that we have a simple equation to evaluate the country’s wealth, we can now input the figures and see what the government has done over their five year period. A negative figure would indicate that we got poorer over the five year period; a positive figure would mean that the country’s wealth increased and a zero or close to zero figures indicates that things remained largely unchanged.

Kenya financial status

Source :Central Bank of Kenya and National Treasury

The total net figure indicates that the wealth of the country decreased by 1.189 trillion shillings. This means that Jubilee made the country poorer over the five-year period. The cause of decreasing wealth of the country can be attributed to high recurrent expenditure and low development expenditure by the government. The situation may worsen as the devolved government continues to increase the wage bill without generating any more new income.

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Posted by Timothy II Aperit

True believer in numbers. Statistics never lie. Bsc Financial Engineering MBA Finance ACCA