William Ruto Faces Great Economic Challenges Ahead as He Becomes Fifth Kenyan President
William Ruto is expected to be sworn in as the fifth president of Kenya today. The celebrations will not take long though as the county’s economy faces huge challenges.
Maize Flour Cost
President William Ruto’s immediate challenge will be to lower the cost of living caused by the rising inflation especially the prices of essential foods like maize flour which retail now at KES 200 [per 2kg packet]. Kenya is experiencing the sharpest rise in inflation in more than 62 months.
Dr. Ruto had promised during his campaign to lower the price of maize within his first 100 days in office to KES 70 per 2kg packet. Now all eyes are on him to see what policy his administration will take to ease the cost of the staple food.
Ruto promised to support the agro-processing industries to enable them to reduce their farm inputs on things like fertilizer, and animal feeds. He believes investing in agriculture will be the best way to achieve food security.
But this move has been criticized as just a temporally stop-gap that can only be sustained for a short term considering the government is short on cash.
Patrick Njoroge the central bank of Kenya governor told the media the sustainability of the subsidies depends on the fiscal space and can only be maintained in the medium term.
Kenya’s Mounting Debt
One of President Ruto’s plans to curb the debt problem is to increase the tax base and fix loopholes. The current tax collection is KES 5.5 billion daily with an average of KES 3.74 billion going to debt repayment.
This currently results in KES 1.3 trillion for debt repayment annually according to figures released by the Kenya revenue authority [KRA]. The heavy debt burden puts constrained on resources dedicated to other development projects.
The coming administration will be forced to demand even more KRA collections. This will be contrary to public opinion which would prefer less taxation. Analysts have argued that this will not be enough and suggested the new president will have to cut expenditure and try to negotiate and restructure the debt.
William Ruto and The Wage Bill Dilemma
Kenya has a wage bill of KES 1 trillion, which is quite high at our level of economic development. Over years the treasury has been struggling to raise money to pay the inflated public wage bill. In fact, it accounts for 50 percent of the taxes.
The great dilemma the incoming will face is trying to reduce the wage bill. At the same time, he should be creating new employment.
The state aims to reduce allowances to a maximum of 40 percent of public workers’ gross pay. This will be a drastic change from the current unregulated model that lifts the take–home to 259 percent of wages.
We will be hoping to see deep cuts to civil servants’ salaries in the coming months. This is part of Kenya’s commitment to the international monetary fund.