President Ruto on tackling Kenya’s economic crisis

Kenya's President William Ruto recently addressed the nation, exuding confidence amidst economic challenges plaguing the country. The President's optimism came just a day after pump prices soared, causing concern among citizens. Ruto, however, reassured the public that his administration is forging a path towards financial stability without resorting to accumulating more debt. Instead, he emphasized the importance of doubling tax collection as a means to tackle the economic crisis head-on. Upon assuming office, President Ruto was immediately confronted with the looming crisis in the fuel sector. Oil marketers conveyed their distress to him, citing an outstanding government debt of 65 billion shillings owed in subsidies. Ruto identified this as a significant issue impacting the financial health of the nation, with the subsidy accumulating at a staggering rate of 15 billion shillings per month. Realizing that the root cause was not solely a fuel problem but also an economic one intertwined with the availability of dollars, the President established an economic team to delve into the matter. The intervention of the economic team led to a crucial revelation that the dilemma stemmed from the unavailability of dollars for oil marketers due to a controlled exchange rate enforced by the government. This dual-rate system impeded the purchase of necessary fuel supplies, intensifying the crisis. To address this, Ruto reinstated the Interbank Forex market to normalize the exchange rate, thereby reducing the currency spread from 12-15% to a minimal 2-3 shillings difference. Additionally, negotiations were initiated to secure credit for petroleum product imports, alleviating the pressure on the dollar market and enhancing liquidity. By allowing the dollar to reach its natural equilibrium and ceasing artificial management of the exchange rate, the administration aimed to mitigate unnecessary financial losses. Ruto's strategic measures proved effective in stabilizing the dollar market and fostering a more sustainable economic environment. An extensive financial commitment of 900 billion shillings dedicated to road infrastructure presented another pressing challenge for the President. Collaborating with several departments, efforts were made to rationalize and reduce the road development expenditure. Despite these endeavors, a substantial sum of approximately 680 billion shillings remained, necessitating additional funding for project completion. The mounting demands from various regions for road upgrades underscored the crucial role of infrastructure in Kenya's economic development. In response to the funding gap for road projects, President Ruto announced a VAT increase of 8% as a means to generate revenue amounting to 50 billion shillings. This adjustment aimed to standardize VAT rates across sectors, curbing manipulative practices and enhancing financial transparency. Simultaneously, measures were implemented to offset the VAT hike, including the removal of certain levies on fuel by 3.5% and 2% respectively, while no longer subjecting gas to an 8% VAT. Furthermore, the President eliminated 14 other taxes to maintain a balanced taxation structure and alleviate the burden on the Kenyan populace. President Ruto's comprehensive economic strategy reflects a prudent approach to address the multifaceted financial challenges facing Kenya. By prioritizing tax collection efficiency, currency market stabilization, and sustainable infrastructure development, the administration aims to steer the country towards a more robust and resilient economic trajectory.