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Cut project spending to break the debt cycle – Business Daily

The Treasury’s recent struggles when borrowing from the domestic market should serve as a warning that the government must implement long-overdue plans to cut unnecessary expenditure.
The incoming administration starts with a budget deficit of Sh845 billion, which will only balloon in future unless the government can curb its habit of rolling out expansionist budgets.
It is instructive that investors in government debt have now smelt the dire need for money, and are demanding to be paid higher interest rates in order to bail out the exchequer.
Should the government bow to this pressure and raise the rates it is offering, it will end up digging a deeper hole for the future because it will need to raise even higher amounts to service this debt.
The solution for this vicious debt cycle, therefore, lies in cutting the need for heavy borrowing in the first place, by implementing expenditure cuts on non-essential projects and recurrent items until revenues can catch up.
Widening the tax base and cutting leakages by catching and charging tax cheats will also go a long way in answering the debt problem.



Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.