United Democratic Alliance (UDA) presidential candidate William Ruto has torn into President Uhuru Kenyatta’s administration’s borrowing, saying the huge appetite for loans is indefensible.
Speaking during a breakfast meeting with the Kenya Association of Manufacturers (KAM) at his home in Karen, Nairobi, the DP said Kenya collects Sh1.8 trillion in revenues annually and there is no justification for spending Sh1 trillion on debt repayment.
The DP said the government should stop the mentality that “this is other people’s money and so let us borrow”.
“I think that is being a bit too casual. We must stop saying we are using other people’s money because it is not working. We are paying a trillion shillings every year on debt,” Dr Ruto said.
“If you are collecting Sh1.8 trilling and paying a trillion every year then you are not at a good place no matter how you look at it. To deal with this hole of debt, we must apply the principle that if you find yourself in a hole then you stop digging and figure out ways of getting out.”
Dr Ruto’s statement comes after President Kenyatta defended his government’s borrowing, which is projected to hit at least Sh6.7 trillion by the time he leaves office.
That would push the total public debt portfolio to Sh8.59 trillion by the end of this fiscal year in June, with the President saying it is necessary to fund infrastructure and accelerate economic growth.
Speaking during Madaraka Day celebrations, the President dismissed critics, saying the debt-fuelled massive infrastructure projects around the country were boosting the economy.
“We have put a lot of resources in infrastructure but the return from those resources in terms of jobs and expected output is not as forthcoming,” said the DP.
He said Kenya’s saving is only about eight per cent of the gross domestic product (GDP) yet China’s is at 55 per cent and that is why Kenya runs to the Asian country for loans.
“We have to deal with the issue of saving. We cannot continue borrowing other people’s money,” he said.
In the region, he cited Uganda as a country that has created a big pool of financial resources from saving, which it uses to fund its infrastructural developments.
Dr Ruto said Uganda, with an economy almost half that of Kenya, has the largest social security fund in East and Central Africa because its law says 10 per cent of one’s salary goes to saving, with employers also matching the contributions.
This law, he explained, has seen Uganda create a big pool of resources to borrow from for its infrastructure projects.
“At the moment, we only pay Sh200 to NSSF even if your salary is 500,000. I think it is silly and we have to rethink ... that whole space of saving and push our saving as a percentage of the GDP to a good level,” he said.
Dr Ruto also faulted his boss for dropping their grand plans after the 2018 ‘Handshake’ with ODM leader Raila Odinga “and going on a meaningless investment spree with no tangible returns”, saying his government would be keen to invest in areas that can create jobs.
He cited the Sh4 billion investment in a gun manufacturing plant in Ruiru, which he claimed resulted in the creation of only 100 jobs, saying if the same amount had been invested in Export Processing Zone businesses, about 5,000 jobs would have been created.
“We dropped the ball in 2018. However, we are going to be deliberate by choosing areas we are going to invest in going forward so that the resources bring returns in many facets like job creation and value addition to goods that we can export,” he said.
“Going forward, we must be deliberate in the areas that we are going to invest in and they must be areas that will help us deal with the challenge of unemployment.”
On taxation, Dr Ruto said the government had failed to create a stable tax environment, with people thinking about what tax will go up every budget cycle.
He said Kenya collects only 3.6 per cent of its GDP as value added tax (VAT), which is 52 per cent of collectible VAT, while Rwanda collects 8 per cent.
He promised, if elected, to create jobs, a bigger local and export market, and leverage existing infrastructure to make the manufacturers’ work easier.
“We must create a market for the product that you manufacture and the focus is to create a population with purchasing power.”
For the micro, small and medium enterprises (MSMEs), he pledged to create an enabling environment and easier access to credit by creating an MSME fund.
“Our focus then is how to create infrastructure that supports people at the bottom of the pyramid, create legislation that protects what they do and make them access credit easily.
