By Brian Okoth
Kenyan President William Ruto has admitted that the economic situation in the country is "not easy" amid a high cost of living that has drawn public outcry.
The East African nation is grappling with higher taxes introduced by the administration of President Ruto, who turned one year in office on September 13, 2023.
Kenyans are now paying higher fees for fuel after the government increased Value Added Tax (VAT) on petrol to 16% from 8% in July.
The net effect of that increment has been higher costs for transportation, manufacturing, and food commodities.
Fuel crosses Ksh200 mark
For the first time in the country's history, Kenyans paid more than 200 shillings for a litre of petrol in September, prices that have remained in place to date, ahead of a review on November 14.
Kenya's Energy Minister Davis Chirchir has warned that a litre of fuel could go up to Ksh300 ($2.00) in the upcoming review, citing the effect of the Israel-Hamas conflict.
Ruto previously said the extra charges on fuel would help raise Ksh50 billion ($328.7 million), which would be "used to repair and construct more roads."
Other new taxes include a 1.5% deduction for housing, and a 2.5% increase on the income tax charged on Kenyans earning between Ksh500,000 ($3,290) and Ksh799,999 ($5,260) per month. This group now pays an income tax of 32.5%, from 30% previously.
More tax increment
The new law also hiked the income tax of Kenyans earning more than Ksh800,000 ($5,260) per month – from 30% to 35%.
The government has proposed a further increase in the amount of tax paid toward the universal healthcare programme.
Though an exact figure has not been settled on, President Ruto recently suggested that employed people would part with nearly 3% of their monthly salaries, which will be remitted to the health insurance scheme.
The government also attracted criticism recently when it proposed exorbitant hikes to the fees charged on citizenship registration and immigration. The charges have since been suspended by court.
Revenue target
When he assumed office, Ruto removed the long-standing subsidy on petroleum products, further pushing up the cost of fuel.
The president has given Kenya's tax collector, KRA, a Ksh2.57 trillion ($16.9 billion) revenue target for the financial year 2023/2024. The target had previously been set at Ksh2.19 trillion ($14.4 billion).
This has seen many Kenyans bearing the brunt of "overzealous" tax collection officers, who have been accused of "excessive aggression" and even "harassment."
For instance, there has been public outcry over the "harassment" of arriving travellers at Kenya's largest airport, JKIA, where KRA staff members check the travellers' bags for undeclared items that are valued at more than $500.
KRA says the goods that surpass that valuation should be taxed at the point of entry.
Mounting pressure
Ruto has faced mounting pressure to address the "harassment" complaints and other unpopular policies that have resulted in an "excessively high" cost of living.
In early 2023, Kenya's opposition led protests in the country to push the government to repeal some of the "punitive" taxes. The protests have since been suspended to facilitate talks between the government and the opposition.
In his address to the nation on Thursday, Ruto said the previous administration mismanaged Kenya's funds, and that he was doing what was "necessary" to correct the wrongs.
"The time has come, therefore, to retire the false comforts and illusory benefits of wasteful expenditure, and counterproductive subsidies on consumption by which we dug ourselves deeper into the hole of avoidable debt," Ruto said.
Eurobond
"The new direction may not be easy, but it is ethical, responsible, prudent and, most importantly, necessary. We have had to take hard decisions and make painful choices because we owe it to Kenyans to do the right thing and confront facts as they are without flinching or equivocating," he added.
The president said his interventions, including mobilising "a broad coalition of bilateral development partners" have helped to "pull our country back from the brink of debt distress" and "set us firmly on the path towards sustainable economic growth."
"Our efforts to stabilise the situation have yielded such progress that next month, in December, we will be able to settle the first $300 million instalment of the $2 billion Eurobond debt that falls due next year," Ruto said.
"I can now state with confidence that we will and shall pay the debt that has become a source of much concern to citizens, markets and partners."
Public debt
Records show that Kenya has a cumulative public debt of about Ksh9.8 trillion ($64.4 billion).
"We have laid a firm foundation for rapid development, and Kenya is no longer (at) 'on your marks'. The state of our nation at this moment in time is (at) 'prepared and ready to go'," Ruto said.
