Economic headaches facing Kenya’s new president
Kenya’s election period drew to a close after former Deputy President William Ruto was named President-Elect, although the future remains blurry after Azimio- One Kenya leadership vowed to challenge the election result in court.
Raila Odinga, the candidate who was declared the first runners-up in the presidential election, has trashed the result which he described as flawed. However, amid the looming court battle, the focus is shifting to how the economy will recover from global and local shocks.
Despite a remarkable 7.5 per cent economic growth recorded in 2021, inflation is threatening to stagnate the growth of core sectors of the economy.
The new office bearers must also deal with the huge public debt, unemployment, a constrained fiscal space, high cost of living and increasing corruption signalling the monumental task ahead for the president-elect. Ruto, who headed the Kenya Kwanza coalition campaign promised to uplift poor households faces the Herculean task of tackling the high cost of living, driven by skyrocketing prices of basic commodities which have plunged many Kenyans further into poverty.
Experts maintain that the cost of living should be the priority at this point, saying that the president-elect must start thinking about reducing taxes on fuel first since it has a multiplier effect on all the sectors.
“It is impractical to let the market dynamics take over the cost of products locally, However, more funds should be plunged into the fuel and maize subsidy programme as the market stabilises. In the current setting subsidy is the immediate fix,” said Clifford Otieno an independent tax expert.
Speaking during the presidential debate, Ruto said his government would go slow on borrowing, putting brakes on unbudgeted projects and raise revenues to address the national debt that currently stands at about Sh8.8 trillion.
“There is room to raise additional funding and revenue for us to manage our debt without necessarily going to say we are going to negotiate our debt,” he said.
This even as Parliament had increased the public debt ceiling to Sh10 trillion as a stop-gap measure to allow the next government to borrow Sh846 billion to plug the budget deficit in the fiscal year that started July 1. Kenyatta’s successor, is taking over the reins of a state with very little room for manoeuvre, but Ruto thinks most cash for projects are wrongly apportioned. “Unbudgeted projects are in the region of Sh100 billion and that is what is spiraling our budget,” he said.
John Kirimi an independent analyst, formerly of Sterling investments says that the setup of the local economy doesn’t allow local levers to manage the economy effectively. He says the huge dependence on borrowing locally by the government, and a huge external economy where 30 per cent of trade is dependent on other countries, will leave Kenya more exposed.
“When governments borrow heavily from treasury bills and bonds this makes it harder for the private sector. Instead, the government should manage the money markets to enable businesses to access funds,” Kirimi notes.
He adds that stabilising the shilling which has grown by about 20 per cent in the past year will cushion Kenyans from high debt repayment. The pledge to borrow locally also comes on the back of two colossal external shocks – the Coronavirus pandemic and now the Russian invasion of Ukraine – and financial sector shocks, which may deny small and medium enterprises (SMEs) funds on risk signal slower growth of the sector.
Despite having been accused of little effort toward ending corruption by his competitors, the next task ahead for Ruto will be to tackle the vice that is dominant in Kenya. Corruption, of which previous and present administrations have failed to tackle, dominated campaign podiums.
Early last year, President Uhuru Kenyatta shocked many Kenyans when he revealed that over Sh2 billion is stolen from public coffers daily.