NAIROBI, Kenya, Mar 28- President Mwai Kibaki has directed the Ministry of Finance to immediately reverse a freeze on development projects in the face of a cash crunch in government.
He said despite negative effects the economic meltdown was having on all sectors of the economy, the government would not jeopardise the country’s long term growth.
"Even as we undertake austerity measures in the use of budget resources, we will not take the easy way and compromise our country’s future by cutting spending on development infrastructure and institutions," he said.
Speaking in Nairobi during a meeting with the National Economic and Social Council (NESC), President Kibaki directed Treasury to find other ‘non-essential’ areas in which to make budget cuts.
The order comes at a time when all ministries are limiting their spending on transport, hiring and other expenses to reduce government’s recurrent expenditure in the face of over Sh100 billion deficits in the budget.
Finance Permanent Secretary Joseph Kinyua issued a circular to government departments early this month ordering a freeze on employment, suspension of development projects and a reduction of allowances for officials.
The President however said he was optimistic that the implementation of sound economic measures would set the country on a quick recovery path.
He cited the power generation and cement production which in February this year recorded a monthly growth of 20 and 10 percent respectively, after several months of downturn last year.
Government revenues, he pointed out had also gone up during the same month as tax collection rose by 25 percent for income taxes, 31 percent for excise taxes, and 29 percent for value added tax, compared to January.
He said the crisis presented a good opportunity for the government to look into other sectors of the economy such as manufacturing and ICT to invest in instead of solely relying on agriculture.
"Indeed, the challenges we now face give us an opportunity to implement some fundamental changes in our mindsets and attitudes towards doing business. We should now invest heavily in business extension over the next few decades by training our young people in schools, colleges, and society to value business enterprise and self-employment," the President said.
Such as move he observed would help promote the establishment of thousands of new businesses and industries which would in turn create employment for young people.
"This is what will be needed to turn our country into a manufacturing and services powerhouse. I therefore expect the ministries of trade and industrialization to take up the challenge," he further instructed.
President Kibaki also urged NESC to recommend ways to help reduce red tape in government.