Despite widespread anger over the removal of subsidies and a raft of new taxes, the President of Kenya, William Ruto has come out to defend his push to slash ‘unnecessary’ public debt.
His state of the nation address came less than 24 hours after Finance Minister Njuguna Ndung’u conceded that the country was in a ‘difficult financial position’.
Africa Today News, New York reports that the East Africa’s economic powerhouse is facing a host of challenges, including depleted government coffers, skyrocketing inflation, and a plunging currency that has sent debt repayment costs soaring.
The nation of some 53 million people had accumulated more than 10.1 trillion shillings ($66 billion) in debt by the end of June, according to Treasury figures, equivalent to around two-thirds of gross domestic product.
“We must admit, that as a country we had been living large and way beyond our means,” Ruto said in his first state of the nation address to parliament since coming to power last year.
“Time has come therefore to retire the false comforts and illusionary benefits of wasteful expenditure,” he added.
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Following his election in August 2022, Ruto introduced a slate of new taxes and raised levies contrary to campaign promises.
He also cut food and fuel subsidies introduced by his predecessor and former boss Uhuru Kenyatta, saying he preferred subsidising production instead of consumption.
‘A new direction may not be easy but it is ethical, responsible, prudent and most importantly necessary,’ Ruto said.
‘We have had to take hard decisions and make painful choices because we owe it to the people of Kenya to do the right thing and confront facts as they are without flinching or equivocating,’ he added.
But overall inflation has remained stubbornly high, at an annual rate of 6.9 percent in October, while food and fuel prices have continued to climb.
The cost of servicing public debt, mainly to China, has soared as Kenya’s currency has slumped to record lows of 151 shillings to the US dollar, and the government also has a $2 billion eurobond repayment due in June next year.
Ruto said Kenya will pay the first instalment of the eurobond repayment worth $300 million next month, adding that public debt had “become a source of much concern to citizens, markets and our partners”.
Africa Today News, New York recalls that in July, global credit ratings agency Fitch Ratings downgraded Kenya’s ability to repay international lenders from “stable to negative”, citing tax hikes and social unrest.