President William Ruto says his administration will steer clear of excessive borrowing even as he continued to court pension funds for a slice of Kenyans’ savings.
The President, in a bid to woo fund administrators and managers, promised that remittances owed to them by government institutions will be settled within two years.
In return, the Head of State expects pension schemes to unclench their fists and agree to loan the government money for its projects but at an interest rate of not more than 10 per cent.
President Ruto, while addressing a stakeholder engagement for pension trustees and administrators held in Nairobi on Friday, said the government cannot afford to borrow at a double-digit rate as has been done before.
“If we find that in the market we cannot find money at 10 per cent, we will go back. It is not possible for us to borrow beyond 10 per cent. That is unacceptable,” said President Ruto at an event organised by the Association of Pension Trustees and Administrators of Kenya at the College of Insurance, Nairobi. “That is the direction we are going. I do not know if it is good news for you.”
Dr Ruto reasoned with the custodians of pension saying he believes none among them is willing for the government to continue borrowing in a way that is not sustainable.
He said the country’s borrowing now averages at Sh8 trillion with almost 60 per cent of the revenue collected by the taxman going into servicing loans. Public debt has bow hit Sh8.7 trillion as of September this year according to Treasury data.
Indirectly, he chastised, the previous administration saying his government will not take the same route. “I promise you I will not be the president that will continue the journey of taking our country into debt,” he said.
Mr Ruto said the debt situation in the country has to be relooked into as he once again defended his office’s directive to the National Treasury to squeeze out Sh300 billion from the current budget.
This directive, he noted, has led to the government going slow on their synonymous expensive launches and trips abroad for officials.
“It is a difficult choice but I don’t see an option. We are going to rationalise the budget and look at what else we can do,” said the President. “It is not a simple assignment; it is not an easy thing to do. But I promise we will do it because it is the right thing to do.”
Dr Ruto insinuated that more austerity measures may be implemented which include delaying some projects. The president urged trustees and administrators to make business decisions with patriotism at heart knowing that this is their country as well.
He lauded the pension schemes, saying they have always been willing to support the government when it reaches out to the market for the money. “I am told 47 per cent of your pension savings and schemes are put in government paper,” he said.
President Ruto also did not however hide the fact that pension schemes are sometimes reluctant to lend money to the government considering the State owes them millions of shillings in unremitted cash.
He said this contributes to the government ending up with expensive loans. President Ruto said he is aware that parastatals, universities and public institutions owe these schemes money and spelt out a plan to ensure it is paid.
“I want a framework that will ensure we pay all that money in the next two years,” he said, adding that the National Treasury and Labour Ministry are looking into the issue.
The Head of State dangled the affordable housing projects and the Sh40 billion Kenya Road Board (KRB) average allocation to the trustees as a sign of the government’s willingness and readiness to work with pension schemes.
He said pensioners will benefit more if the schemes are invested in the State’s affordable housing projects rather than having the savings lost in questionable land transactions.
“We have available every year from KRB about Sh40 billion that I can pay you, ring-fenced. It is not part of the money I use to do other things,” said Ruto. “It is dedicated and I want us to agree with you how I can pay you Sh40 billion every year if you give me the money.”