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A photo of President William Ruto during a past address at State House Nairobi.
 

Deputy President Rigathi Gachagua on Sunday, April 9, confirmed that the government was facing a cash crunch amid unprecedented salary delays for civil servants working at both national and county levels.

His remarks, during a church service in Mathira Constituency, signified the magnitude of the crisis as the government is caught in a fix in trying to settle its debt obligations while at the same time paying salaries.  

The conversation elicited debate with critics and pundits weighing in on measures the government can take to get out of the proverbial rabbit hole.

An unpopular idea that floated around was the conversation on the government's option of printing money to solve the cash crisis.

 

Is printing money an option?

Speaking to Kenyans.co.ke, Prof. XN Iraki, an associate professor at the University of Nairobi faculty of business and management sciences, warned that such a move would lead to hyperinflation which would consequently erode the real value of the local currency. 

He pointed out the situation that occurred in Zimbabwe whereby the inflation rate of the country peaked rapidly leading to hyperinflation for over a decade.

In addition, Prof Iraki noted that the government should opt for diplomatic means to convey such sensitive information to avoid causing panic among investors and the public in general.

"(In my view) The government will be forced to borrow money just like the previous administration. If they can not raise enough money, the alternative is to borrow. Another means of raising funds is to reduce government expenditure which had not sufficed in the current state," he noted.

His words were echoed by economist Vincent Kimosop who explained that printing more money had to be backed up by real value.  

"A country's currency symbolises a unit of measurement and medium of exchange and hence this has to be backed up by value or otherwise it will lead to a lot of money circulation chasing few goods," he noted.

The economist affirmed that the country's crisis was a result of the maturing debt and the slow economy owing to the drought situation and post-pandemic period.

"We need to get the economy up and running so that we have people who are positively making a contribution and the government will be able to tax their goods and services."

He commended the government for initiating efforts to facilitate the farmers to allow for more food production and in turn reduce the cost of commodities. 

"Once we ease out of this, we will be on the right trajectory, possibly after six months then we can assess where we are," Kimosop pointed out. By Brian Kimani, Kenyans.co.ke

 

 

 

 

 

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