President William Ruto has detailed how his administration’s bottom-up plan is progressively transforming the country’s economy as he announced the government will in December repay $300 million (Sh45 billion) out of the $2 billion Eurobond debt that is due next year.
The President, in his second State of the Nation address, painted a picture of the gains his administration has made in one year even as he acknowledged the difficulties the government is facing in the wave of unprecedented macroeconomic challenges.
He said he took control of the country when its economy was facing external shocks, fiscal distress courtesy of the debt burden and structural imbalance.
The challenges were exacerbated by geopolitical conflicts, high-interest rates, prolonged drought and suppressed production in agriculture.
Dr Ruto said his administration has been able to “normalise” relationships with development partners, among them the International Monetary Fund (IMF), African Development Bank (AfDB) and World Bank.
Even as he gave himself a pat on the back, he noted that the economic situation the country was in when he took the reins was avoidable, saying the country was living large and way beyond its means.
“Time has come to retire the false comforts and illusional benefits of wasted expenditure and counter-productive subsidies on consumption by which we dug ourselves deeper into the hole of avoidable debt,” he said.
He said due to his strategy to subsidise production and not consumption, the price of a two-kilogramme packet of maize flour has dropped to Sh145 from Sh250 last year.
This has been facilitated by his administration’s fertiliser subsidy programme that distributed 5.5 million bags at a cost of Sh2,500 instead of Sh6,500.
These interventions have also seen increased farming of maize by 200 acres with expected additional production of 18 million bags.
“As a result, the famous gorogoro of maize is now retailing at between Sh60 and Sh75,” he said.
President Ruto said the country needs a new direction, which may not be easy, to drive the economy out of debt. However, he said this was ethical, responsible, prudent and a necessary move to make.
“We have had to take hard decisions and painful choices,” he said, adding that public borrowing had suppressed the growth of private sector.
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He said the government’s efforts to stabilise the situation have yielded such progress that next month, the country will settle the first batch of the Sh300 billion ($2 billion) Eurobond debt.
“I can now confirm with confidence that we will and shall pay the debt that has been a source of concern to citizens, market and partners,” said the president.
He said the country has ironed out relations with development partners locally and abroad and they are also supporting the country’s efforts to get out of debt distress.
“They( development partners) are now working with us to implement the Bottom-up Economic Transformation Agenda,” he added.
The president said the government plans to put up more than 700,000 housing units in the coming years, with about 50,000 already under construction and at different stages of completion while work on another 40,000 is set to start in the coming weeks.
“The construction of 46,792 units across the country is underway. Another 40,000 are ready to commence in a few weeks.
“More than 50,000 Kenyans are working, people who were previously unemployed are engaged directly and indirectly. The numbers will significantly increase as the projects move into the next phase and as we roll out many more units,” he said
He noted that the affordable housing project was aimed at addressing the major challenges that Kenyans, mostly in urban areas, face that range from poor health and insecurity.
The President also told MPs that the government is constructing 400 markets across the country that are equipped with water, electricity and other amenities that will provide traders with dignified working places
The President also said the National Cereals and Produce Board would take receipt of a first batch of mobile dryers for use by maize farmers.
He added that the government is streamlining the coffee sector and farmers will soon have greater say in taking the produce to market, including enhanced participation at the auction.
The president also said his government is restructuring the public sugar millers in a process that will result in the leasing of the five public-owned sugar milers to private sector players. This would boost competitiveness, raising farmers incomes and enhancing productivity
The government has waived Sh117 billion non-performing debt owed to the government by sugar millers.
It has also set aside Sh1.7 to pay cane farmers who had not been paid by the State-run millers for the cane they have delivered. The President said the Treasury would release the money to the farmers in the coming weeks.
“In the next couple of weeks we shall be disbursing that money so that farmers in the sugar growing areas can go home for Christmas with that money,” he said.
Among the things that the government implemented early this year was to increase contributions to the National Social Security Fund (NSSF) after a court ruling on the constitutionality of contributions that had dragged on in court for years.
Following the ruling, NSSF increased monthly rates from employees to Sh1,080 from Sh300, matched by the employer. This was greeted with uproar by both employees and employers, noting that this would reduce the disposable income as well as increase the cost of labour.
Ruto, however, noted that this had significantly increased the country’s savings and now gave the government the opportunity to borrow locally for infrastructure development as opposed to sourcing for funds from foreign institutions.
“As a result of our initial intervention, the savings situation has changed for the better. Contributions to NSSF has grown from Sh1.4 billion in January to Sh6.5 billion this month.
“The implication of this growth in our national savings is that it will significantly consolidate our nation;s ability to invest in development using domestic resources as opposed to us going to borrow other people’s money when they borrow ,” he said.
[Graham Kajilwa and Macharia Kamau]