No interaction made such a lasting impact on my career as the one with the departed President Mwai Kibaki, a sharp intellectual giant. In merging academic rigour with policy insights that transform broken economies, few economists cross the journey with the ease that Kibaki did.
From the start, he turned from discredited demand-side palliatives to supply-side transformations and a belief in Kenyans’ capabilities to fix their own problems and create wealth for themselves.
Ever a man of few words who stared down on political rubble-rousers (remember his exasperation with characters he called bure kabisa) 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. Cometh a time, cometh the man who had, in the 1970s, already distinguished himself as an outstanding finance minister.
President Kibaki started the turnaround by repairing a runaway banking system. He slashed sky-high interest rates and rebuilt broken revenues, with strong competencies at the Kenya Revenue Authority.
Second, he engaged me, almost casually at one time while twirling his glass of beer at the Muthaiga Country Club, when I was drafting the Kenya Country Strategy Paper CSP of 2005-2007 as a consultant for the African Development Bank. He talked of the battle to secure funding for the Thika Superhighway, which I then went on to write into the AfDB’s plan.
Kibaki was a sharp listener and much more adept than any existing or aspiring leader today on the economic problems at hand.
He had asked for rigorous analyses on the broken public finances of the debt-ridden economy.
I presented a PowerPoint of an array of options and how to find a workable policy mix between fiscal and the monetary sides. The proposal was a sharp and innovative fiscal consolidation, cutting wasteful government spending but conserving growth-inducing development spending while slashing interest rates by taking away the feeding frenzy of liability-laden banks teeming with customers’ deposits but merely sitting back to earn high returns without a sweat. How? They fed on the appetite of government for issuing Treasury Bills and Bonds, crowding out private sector growth.
The public and private sector were paying the price in astronomical interest rates and economic activity had declined to a growth rate of 0.55 percent in 2002.
Kibaki teamed up with then Finance Minister David Mwiraria to revive the economy by taking away the banks’ punch bowl. By January 2003, banks were hawking loans from kiosks on the streets, and the alternative lending to the private sector was purring the economy towards a growth rate of 8.4 percent by 2010.
Free primary education brought more than one million children to school, and this today renders Kenya’s skills capacity a major plank of its development opportunities.
Altogether, development resumed in all areas of the country, including the hitherto neglected and largely undeveloped semi-arid or arid north.
Many sectors of the economy recovered from collapse.
A remarkable achievement was the Constituencies Development Fund (CDF) introduced in 2003, designed to support constituency-level development projects. This reduced imbalances in regional development ensuing from longstanding partisan politics. CDF gave birth to the devolved system of government in 2010.
And none can gainsay the impact of the long-term blueprint, Kenya’s Vision 2030.
Kibaki also injected fibre-optics second to none on the continent and started the dream called Lapsset.
The reform of the Public Service embedded new tenets in government.
The Thika Superhighway is a different story that almost got me fired from AfDB, along with my director. We persevered with a cheeky geopolitical competition for procurement of the project, which veered East while there were keenly interested parties in the West.
Today, the economic impact of the project is a lesson on how policy and targeted interventions can trigger economic dynamism from regions, turning dead capital to wealth.
May his soul rest in eternal peace.
Dr Mbui Wagacha is a former senior economic advisor, executive office of the president, and acting chairman of the Central Bank of Kenya.