President William Ruto yesterday warned of tougher economic times ahead, indicating that the already struggling citizens should tighten their belts even as his administration deploys various interventions to alleviate the situation.
The President said his administration has been forced to make painful choices, including scrapping of subsidies on petroleum products, that have significantly pushed up the cost of basic commodities against his lofty pre-election promises to prioritise the needs of low-income earners and bring down the cost of living.
In his State of the Nation address, the Head of State continued to blame his predecessor, former President Uhuru Kenyatta, for allegedly plunging the country into an “avoidable debt hole” through wasteful expenditure and counterproductive subsidies on consumption.
“As I told Kenyans on my first day in office, times were difficult and many people are struggling and necessary and effective sustainable solutions were urgently needed. We must admit that, as a country, we had been living large and way beyond our means,” President Ruto told a joint sitting of Parliament.
State of the Nation: President Ruto's full speech
“The time has come, therefore, to retire the false comforts and illusory benefits of wasteful expenditure and counterproductive subsidies on consumption by which we dug ourselves deeper into the hole of avoidable debt. The new direction may not be easy,” he warned.
Six out of seven key economic indicators show that the country is in a tight spot. This has been worsened by new tax measures introduced by the Kenya Kwanza administration. Life has become more expensive, with salaried Kenyans having a significantly reduced net pay while businesses have also been hard hit with high taxes. The high fuel prices, which are above the Sh200 mark, have since pushed inflation to rise for the third consecutive month.
The shilling has also been trading at a record low of Sh151.3 against the dollar, implying that Kenyans have to pay more for imports such as fuel.
President Ruto revealed during his address that Kenya has become a net importer of food in a volatile market.
Energy Cabinet Secretary Davis Chirchir had on Monday warned that fuel prices could hit a high of Sh300 per litre in the coming months as a result of the war between Israel and Palestine.
At the same time, a majority of Kenyan firms have frozen expansion plans as a result of increased operating cost occasioned by high taxes and persistent cash flow challenges.
But, in his address, the President listed various interventions being implemented by his administration, including creation of jobs through various projects such as affordable housing, clearance of debt burden, provision of subsidised farm inputs as well as credit facilities to small-scale traders to spur economic growth.
“We have worked hard, at home and further abroad, to mobilise a broad coalition of bilateral development partners, multilateral development banks and other agencies, which have rallied to pull our country back from the brink of debt distress and set us firmly on the path towards sustainable economic growth,” said the President.
He told the MPs that his administration will next month settle the first $300 million instalment of the $2 billion Eurobond debt that falls due next year.
“I can now state with confidence that we will and shall pay the debt that has become a source of much concern to citizens, markets and partners,” the President said.
He said that the country’s public borrowing under the previous regime, where he served as the Deputy President, had crowded out small and medium-sized enterprises from accessing loans for their businesses.
His said implementation of the Hustler Fund that was launched in November last year has made credit accessible to small-scale traders and has protected them from being blacklisted by credit reference bureaus.
“The public response to the Hustler Fund has exceeded most initial projections and surprised even the most hardened sceptics. By the end of last month, the Fund had disbursed Sh36.6 billion, with Sh2.3 billion in savings and 7.5 million repeat borrowers whose overall repayment rate is at an impressive 73 per cent,” said the President.
He said provision of subsidised fertiliser has succeeded in bringing down the cost of maize flour to a low of Sh145 per two-kilogramme packet, down from Sh250 when he took office.
A spot-check in major supermarkets, however, indicated that popular brands are still retailing at an average of Sh200.
He said his administration has progressively reduced the cost of fertiliser from Sh6,500 to Sh2,500. This, he said, has increased the acreage under maize production by an extra 200,000 acres and enhanced output by an additional 18 million bags.
“As a result of these interventions, today a 2kg packet of maize flour is selling at a low of Sh145 and a high of Sh175 depending on the brand down from Sh250. A gorogoro of maize is selling at between Sh60 and Sh75,” he said.
On coffee sector reforms, the President said farmers are set to earn four times the advance pay for their crop, from a low of Sh20 to Sh80, following the allocation of Sh4 billion from the Coffee Cherry Fund.
President Ruto: As a country were living way beyond our means
He said: “Coffee reforms regulations will give farmers' the necessary representation and weight at the Nairobi Coffee Auction. These measures are expected to aid ongoing efforts, including expanding production to new counties and double coffee output in the next four years.”
Dr Ruto, who rode to power on a promise to create jobs for millions of unemployed youths, said his affordable housing project has created a total of 50,000 job opportunities.
The President added that construction of a total of 46,792 units in various parts of the country are currently underway, while another 40,000 are ready to commence construction.
“Fifty thousand Kenyans, who were previously unemployed, are now engaged directly and indirectly in this enterprise, and the numbers will significantly increase as the projects move into the next phases. A total of 746,795 housing units are in the pipeline, undergoing various stages of delivery,” said the President.
He said more jobs were being created with the formalisation of the Jua Kali clusters, providing products like doors, hinges and windows.
In the education sector, the President highlighted various reform programmes to make the competency based curriculum work effectively. Since he took office, he said, a total of 56,750 new teachers have been employed.
Another 8,200 primary school teachers were retrained to equip them with capacity to effectively deliver learning and teaching at the junior school level.
“The new model for financial support is student-centred and deploys a rigorous, impartial means testing instrument to establish their level of need, which then becomes the primary consideration in allocating scholarships and loans,” he said.
In the health sector, the President listed radical reforms initiated by his administration in providing universal health care.
Under Afya Nyumbani, the President said his administration has scaled investment in the healthcare workforce by employing 20,000 new healthcare workers.
Another 8,429 healthcare workers, whose contracts had lapsed, have been deployed while 3,394 interns have been enrolled across the country to increase human capital in the public health sector.
He said his administration, together with all the 47 counties, have deployed 100,000 community health promoters fully equipped with the necessary kit and an electronic community health information system.
