While it might be too early to reach a verdict, after being in the seat of power for just over a year, we can begin to assess the direction in which the economy is moving under the William Ruto administration and the impact of his policies on the Kenyan economy.
When President William Ruto assumed power as Kenya’s fifth president, he met an economy that was beset by rising food and fuel prices, high rate of unemployment and a huge debt burden. As is typical of all politicians, President Ruto during his election campaign promised to fix the economy, and tackle corruption and ineptitude in governance. While promising to put the poor at the center of his economic policies, he also pledged to uphold the rule of law while addressing the issue tribalism in their politics.
In fixing the economy, Ruto’s promise to uphold the rule of law and the constitution of the land are very significant as they have a huge impact on economic planning, policy formulation and investor confidence in the economy. Since independence, Kenya has had a history of it’s political elite exploiting ethnicity to obtain power. Appointments into public office are based on such sentiments as well thereby denying more competent people the opportunity to serve while entrenching corruption and weakening state institutions.
However nothing much seems to have been done in the area of adhering to the rule of law as Ruto has been selective in obeying court judgements that were given against his administration while very little is being done to curb corruption especially amongst the elite. Ruto had also spoken out against extra judicial killings and impunity by the Kenyan police over the years, despite now being in control of the government, he has done nothing to reform the police and make them more accountable while lack of transparency and extra judicial killings continue to undermine the Kenyan police.
From the above, it can be suggested that business remains the ‘same as usual’ in Kenya and little is being done to propel the country in a positive direction. However, Ruto did make some economic reforms as he was quick to remove fuel and food subsidies while imposing new taxes and increasing existing taxes yet noting was done to cut down on the bloated cost of government which keeps increasing the deficit and is responsible for the country’s huge debt burden.
As if the additional tax burden was not enough, the cost of living in Kenya is now higher as a result of a steep increase in the price of petrol which has a direct implication on the cost of transporting goods and services, and also the loss in value of the local currency which lowered the purchasing power of the average Kenyan.
On a more positive note, Ruto’s administration after removing subsidies on petrol which is a subsidy on consumption decided to use part of the savings on subsidizing agricultural activities by introducing subsidies to fertilizers being used in farms to boost agricultural output and ensure food security. While this is a step in the right direction, it remains to be seen if the policy will be a success as the implementation of the subsidy program was poorly done and more deliberate measures need to be taken to support the agricultural sector as the mainstay of the Kenyan economy.
To make credit more accessible to the public at cheaper rates, President Ruto also introduced the Hustler fund to provide Kenyans with affordable credit. The fund comprises of four products; personal, micro business, SME, and start up loans while the interest rate is pegged at 8% except when there is a default, it then increases to 9.5%.
As at October 2023, the fund had given out loans worth Sh26.6 billion to 7.7 million Kenyans and achieved a repayment rate of 73% thus having a major positive impact on the economy especially in the area of job creation. However, observers say that whatever positive impact the Hustler fund is having on the economy is being taken away by the new and increased taxes imposed by the Ruto administration which has reduced the disposable income of the people.
While it is true that Ruto inherited a declining economy with stifling debts and high unemployment rate, his economic policies have inflicted more pain on the people as prices of petrol have gone up by 22%, electricity by nearly 50%, sugar by 61% and beans by 30% while additional taxes have been imposed on an already impoverished populace.
This is at the same time that the government has done nothing to cut the cost of governance neither is anything being done to curb corruption both of which are a major burden on the economy of Kenya. President Ruto needs to be reminded that the economy should be primarily about the welfare of the people and not about increased revenue to the government to pay for their indulgences as seems to be the case in Kenya today.
While he has implemented policies such as the Hustler fund and the subsidy on agriculture to help stimulate growth in the economy, the full impact of these policies remain to be felt by the Kenyan people because of the additional tax burden being imposed on them at the same time that the cost of basic goods and services are skyrocketing as a result of his government’s policy.
While some of the economic reforms are necessary to get the economy back on track and it might take time to feel the full impact of these policies, President Ruto needs to reduce the negative impact of his policies on the people by cancelling the additional taxes that he introduced and reducing the old taxes while taking major steps to reduce the cost of governance and fight corruption to reduce the government’s need for funds to service its expenditure and debt service burden.
To win public trust and investor confidence, President Ruto also needs to strictly adhere to his promise to uphold the rule of law while he introduces reforms to the Police force to make them more accountable and responsible to the people. At the same time, the issue of corruption in the judiciary needs to be addressed while the judiciary is reformed.
It may be too early to pass a verdict on President Ruto’s economic policies as they need time to work but what cannot be denied is the reduction in the purchasing power of the people as a result of these policies which is counterproductive.
The President needs to be reminded that ultimately, the economy is about the welfare of the people and any economic policy that doesn’t prioritize them is bound to fail. While I wish him all the best as he strives to make life better for the Kenyan people, he needs to go back to the drawing board and fine tune his policies to reduce the burden on the people while the benefits of his economic policies take its time to manifest.
Oshobi, a management consultant, development economist and author, writes from Lagos.