Musalia Mudavadi: The pain of high cost of living will be with us for a while
Prime Cabinet Secretary Wycliffe Musalia Mudavadi taking the oath of office at State House Nairobi on October 27, 2022.
Kenyans have been asked to be patient with President William Ruto’s administration.
According to Prime Cabinet Secretary Musalia Mudavadi, the challenges of the high cost of living that Kenyans are currently facing will be a short-lived pain that will soon be replaced with big gains from the investments being made in food production.
He blamed the hard economic times facing the country on former President Uhuru Kenyatta’s administration, in which President Ruto served as Deputy President, saying it had lived beyond its means.
“The high cost of living is an inherited deluge of a government that lived beyond its means, a headache that the former government left to us. It didn’t happen by accident but by commission and omissions. You cannot sincerely attribute the current pain Kenyans are going through to this government,” Mr Mudavadi said during an interview.
He said the Ruto administration was changing tact from “feeding on an empty trough of consumption to filling the production granary”.
Pain, gain
“The pain will be there for a while but in the end, there will be gain. If we sustain support for production, the prices of basic consumer goods will come down with increased supply,” he said.
He claimed, without providing any proof, that the outgoing regime used the “scorched-earth-policy” approach as an attempt to set up Dr Ruto’s administration to fail.
“This is where serious policy decisions will have to be made to bring the economy back on the right trajectory while easing the cost of living.”
Mr Mudavadi told Kenyans that a number of austerity measures will be put in place, not to harm the people but to help in “cleaning up the mess” inherited from the previous administration.
“We live in an economy where more than 1.4 million people are unemployed, close to 4 million are under-employed, and many more continue to join these ranks. We are wasting talent that can contribute to building the nation.
“We have a plan to invest in ventures that will create jobs for these Kenyans. We are setting up structures to boost close to 10 million informal sector workers – mama mbogas, hawkers, mkokoteni pushers – who are often left out in the provision of government services to foster and uplift them. We are looking forward to investing in this informal sector, to grow it and make larger contributions to the economy,” he said.
He claimed that the opposition Azimio la Umoja One Kenya alliance was misleading Kenyans over claims that Dr Ruto’s regime was seeking to increase their tax burden.
President Ruto is on record issuing a directive to the public to pay taxes as the government moves to ramp up revenue collection in its race to meet its Sh6 trillion collection target by 2027.
Tax reforms
The government has, through the Kenya Revenue Authority (KRA), embarked on tax reform measures that could see every Kenyan above 18 years brought into the tax bracket.
Deputy President Rigathi Gachagua (left), President Dr William Ruto and Prime Cabinet Secretary nominee Musalia Mudavadi at State House in Nairobi on September 27, 2022.
The President said higher tax collection would create a more independent country that relies on its own sources instead of external borrowing.
“We need to pay taxes so that we can get resources for development projects and also be able to repay the debt that we have as a country,” he said.
Azimio leader Raila Odinga has asked President Ruto to shelve any thoughts of raising taxes on suffering Kenyans.
“We are particularly concerned about the regime’s plans to inflict more tax burden on Kenyans to finance some of the outlandish and unrealistic promises they made,” said Mr Odinga.
Dr Ruto said it is regrettable that only seven million people in Kenya are registered and have a KRA Personal Identification Number (PIN), and yet the mobile money transfer platform M-Pesa has more than 30 million users.
The KRA’s records indicate that it collects about Sh1.88 trillion in taxes annually, which is slightly above half of what the Treasury budgets for expenditure every year.
Mr Mudavadi denied that the government has made new tax proposals.
“As far as I am aware, the Kenya Kwanza government hasn’t made any taxation proposals yet. When such proposals are made, they must be approved or rejected by Parliament. I suspect the opposition leaders are confusing existing punitive taxation measures put in place by the previous regime with what might come from our new government in the form of a supplementary budget. They should not superimpose issues. We are trying to cure a malady that pre-existed us.”
KRA PIN
He also denied that the Kenya Kwanza administration plans to have every Kenyan above 18 years brought into the tax bracket through “forceful acquisition of the KRA PIN”.
“Making it easier for potentially eligible persons to pay tax by simplifying registration procedures does not equate to ‘bringing every Kenyan above 18 years into the tax bracket’. What we are aiming at is to make the registration for tax contribution easier and more efficient, and using this also as a way of creating broad awareness about one’s responsibility to contribute to nation building.”
He went on: “The idea of a KRA PIN is anticipatory; it is not meant to tax every other Kenyan. It is a pre-emptive move so that you grow up with it rather than having to hustle to get it. The idea is meant to lessen tensions for Kenyans seeking employment. It is also helpful to KRA in monitoring who has graduated as a taxpayer. It’s good for the country. You can only misconceive it if you support tax evaders.”
He said that plans will be put in place to expand the tax base, thus ensuring more revenue is collected without necessarily increasing taxes on Kenyans and businesses.
“The Hustler Fund, which will provide collateral-free lending to SMEs at single-digit rates, will be launched shortly. It will provide relief, especially to micro-enterprises that currently borrow from shylocks and digital lending platforms, which charge interest in excess of 3,600 per cent per annum.
Just to show Kenyans that we mean business, we have seen to it that Fuliza rates are cut by half, with more reductions on interest rates and penalties further envisaged,” Mr Mudavadi said.
The Prime Cabinet Secretary also said the government will develop several measures, including floating bonds, to enable the payment of pending bills so that it meets its obligations and invests without relying solely on revenue from taxation.
The target, he noted, is to make sure that investment opportunities also stretch to the private sector.
He added that the National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF) will undergo reforms.
“In our plan, we intend to restructure these two vital institutions to benefit Kenyans. The government is encouraging working Kenyans to save enough through NSSF to insure themselves in retirement. For every penny you save, the government and employer will top it up in equal measure. The final beneficiary is that retiring Kenyan worker,” he said.
Mr Mudavadi said his office will operate on an open-door policy with a focus on service delivery to Kenyans.
The Office of the Prime Cabinet Secretary is the pivot responsible for making government delivery more effective by coordinating ministerial policy and services.
As designated by President Ruto, it is the fulcrum upon which the delivery of public services will be measured.
