Kenyan President William Ruto defended his economic policy in Parliament on Thursday (November 9), saying he wanted to tackle “unnecessary” public debt in this East African country, despite growing discontent among the population.
Mr Ruto’s first state of the nation address, elected in 2022, comes a day after Finance Minister Njunguna Ndung’u announced that the country was in a “difficult financial situation”.
The locomotive of East Africa, the Kenyan economy was seriously shaken by Covid-19, then the shock wave of the war in Ukraine and a historic drought in the Horn of Africa. Public debt in the country of some 53 million people stood at more than 10.1 trillion shillings (around 62 billion euros) at the end of June, according to Treasury figures, or almost two-thirds of gross domestic product.
“We must admit that as a country we have been living beyond our means,” said the Kenyan head of state, who came to power in 2022 after serving two terms as vice-president. “The time has therefore come to remove illusory comforts (…) and counterproductive subsidies to consumption because we are further digging the unnecessary hole of debt,” he continued.
“Painful choice”
Following his election in August 2022, William Ruto introduced a series of new taxes, going against his campaign promises. Against these new tax measures, demonstrations, which left several dozen dead, were organized between March and July at the call of the opposition.
The head of state also reduced subsidies – particularly on gasoline – introduced by his predecessor Uhuru Kenyatta, saying that he preferred to subsidize production rather than consumption. “A new leadership may not be easy, but it is ethical, responsible, prudent and above all necessary,” Mr Ruto said, adding that he had to make “painful choices”.
Economic growth slowed to 4.8% in 2022, compared to 7.6% in 2021, and growth forecasts for 2023 look lower than in 2022. While inflation has slowed (6.9% year-on-year in October), the prices of gasoline, basic foodstuffs and energy remain high.
The cost of servicing public debt, mainly to China, has increased sharply with the collapse of the currency. In June 2024, Kenya must also repay $2 billion in Eurobonds.
William Ruto announced on Thursday that the country would repay a first tranche worth $300 million next month, adding that public debt had “become a source of great concern for citizens, markets and our partners”. In July, ratings agency Fitch downgraded Kenya’s ability to repay international lenders from “stable to negative.”
