Kenya’s new budget cuts crucial to cooling down the economic crisis

Kenya is in the midst of an economic storm, triggered by three weeks of public protests demanding tax reductions and an end to corruption. President William Ruto recently made a series of bold announcements aimed at addressing the crisis, including budget cuts and the formation of a debt task force. To analyze the implications of these measures, CNBC Africa spoke with Odhiambo Ramogi, an Economist and CEO of Elim Capital. Ramogi expressed skepticism about the effectiveness of the President’s initiatives, highlighting ongoing challenges and public discontent. Ramogi acknowledged President Ruto's efforts to alleviate political tensions by engaging in various public platforms, but stressed that underlying issues persist. Despite the withdrawal of budgets for first and second ladies and the cancellation of deputy minister appointments, young people remain dissatisfied. They continue to call for tax reductions and economic reforms to address high unemployment rates and foster national development. Regarding the budget cuts, Ramogi emphasized that the President's proposals must still undergo parliamentary debate and approval to take effect. He cautioned that without concrete action or structural changes, public distrust in the government may persist. Additionally, Ramogi questioned the constitutionality of the debt audit task force, noting that the mandate to audit public debt lies with the Auditor General. He suggested that the focus should be on addressing current tax policies and revenue collection practices to tackle the growing debt crisis. Ramogi also raised concerns about the mismanagement of public funds, citing examples where borrowed money intended for projects in Kenya was mishandled or misappropriated. He underscored the urgency of conducting a comprehensive audit of public debt but cautioned against shifting focus away from critical issues such as sustainable tax policies and accountable governance. The opposition's calls for a debt audit stem from discrepancies and irregularities in Kenya's debt portfolio, including funds borrowed for infrastructure projects that may not have been fully utilized for their intended purposes. Ramogi echoed the need for transparency and accountability in managing public finances, emphasizing the detrimental impact of unsustainable debt levels on the country's economy. As Kenya grapples with economic challenges exacerbated by the COVID-19 pandemic and long-standing issues of corruption and governance, President Ruto's proposed budget cuts and debt audit task force are met with cautious optimism and skepticism. The road to economic recovery and stability will require not only short-term measures but also comprehensive reforms to address systemic issues and restore public trust in government institutions.