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Just what needs to happen for the cost of living to come down in the country?

Incoming President William Ruto will walk a tight rope in the coming months to deliver on a raft of his rosy campaign pledges to Kenyans amid a slow economy. [Istockphoto]

Incoming President William Ruto will walk a tight rope in the coming months to deliver on a raft of his rosy campaign pledges to Kenyans amid a slow economy. 

Ruto is succeeding  President Uhuru Kenyatta as the fifth head of state of East Africa’s largest economy.

The weight of expectation will be on Ruto to deliver on a wave of big-spending, populist policies without damaging the already hurting economy.

But the new President’s political honeymoon could be short-lived after he is sworn in today, at a time Kenya is faced with a cost-of-living crisis and soaring public debt, experts said.

Implementing his immediate mega pledges will be a headache for the government at a time the International Monetary Fund (IMF) is demanding tough austerity measures, like putting an end to fuel and maize flour subsidies otherwise it could withdraw its support for Kenya.

The IMF, which is supporting Kenya with direct budgetary financing, has maintained the fuel subsidy has negative impacts on the economy and want it scrapped.

President Uhuru Kenyatta’s government turned to the subsidies to cushion Kenyans against a surge on the cost of living.

The subsidy allowed the energy regulator last month to keep diesel and petrol prices unchanged last month at Sh140 and Sh159.12 respectively in Nairobi.

Without the subsidy, motorists would have paid a historic high of Sh214.03 per litre of petrol and Sh206.17 for diesel in what could have stoked pressure on inflation.

Currently, the country struggling with inflation that hit a record high of 8.5 per cent in August on the back of costly food and fuel. 

Covid pandemic

The price rises, partly fuelled by the economic fallout unleashed by the war in Ukraine, have deepened problems triggered by the coronavirus pandemic, stalling wages and youth unemployment.

Mr Deepak Dave, an analyst at Nairobi based Riverside Capital Advisory, says the country’s debt burden and how to resolve it would be one of Ruto’s largest policy headaches.

“Nothing else really matters because fiscal, monetary, currency, tax, growth, and employment policies all intersect at one place,” said Mr Dave.

“What can the government afford to fund? Without a clear plan for debt reduction, everything else is just promises.”

Ruto has promised to rein in public debt, which has gone up by more than Sh7 trillion since outgoing President Uhuru Kenyatta assumed office in 2013. “The government must drastically cut on pilferage of public resources through corruption,” said Consumer Federation of Kenya secretary general Stephen Mutoro.

“We must deal with the punitive over-taxation. President-Elect William Ruto will be well advised to urge the National Assembly to review the Finance Act, 2022 and ease excessive tax burden on consumer goods,” added Mutoro.

Ruto’s economic blueprint emphasises empowering the underprivileged through the “bottom-up economic model.”

While advocating for the model, Ruto said he will use it to lift millions out of biting poverty.

Ruto has also been saying this model will benefit millions of Kenyans who are unemployed as well as small and medium enterprises.

“Bottom-up is anchored on deliberately promoting investment and financial instruments targeting the millions who are unemployed, hustler enterprises, and the farmer groups,” he said.

In his first 100 days, Ruto has promised to support the establishment of agro-processing industries for farm inputs such as animal feeds and fertilisers, blaming the current food shortages on the government’s decision to remove subsidies and failure to implement food security policies.

But besides the broad based pledges, Kenyans will be eyeing practical steps to ease the cost of essential items like cooking oil, fuel, soap and maize flour in particular, experts say.

“The challenge of high cost of living can be dealt with by investing in agriculture, period. Explanations about Ukraine, I don’t know what, are tall tales,” Ruto said. 

To empower low-income groups or “hustlers” as he calls them, Ruto promised to provide Sh50 billion a year to fund small businesses and start-ups.

“We will commit Sh50 billion a year to provide MSMEs with 100 per cent access to affordable finance through Saccos, venture capital, equity funds and long-term debt for start-ups and growth-oriented SMEs.”

Ruto said he will scale back spending on mega roads, rail and energy projects, rein in debt and pump more money into small businesses.

Ruto promised to end what he terms as “state capture” by establishing, within 30 days of his ascension to power, a quasi-judicial public inquiry to “unravel” the extent of alleged cronyism and make recommendations.

On job creation, Ruto pledged that the Kenya Kwanza government  will invest Sh500billion over the next five years in lower-level agriculture and informal sectors to create opportunities for women and youth.

President Ruto said he would also reverse legal and administrative changes over the use of the Standard Gauge Railway.

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