Brace yourselves for harder times ahead, President Ruto to Kenyans in New Year message
Kenyans hopes for government interventions to cushion them from skyrocketing cost of living were yesterday dashed after President William Ruto reiterated that direct subsidies on a number of government programs were unsustainable and counterproductive to the country’s economy in the long-term and therefore had to be removed, the president said yesterday night in his message to usher in the New Year 2023.
Addressing the nation from Mombasa, the president indicated these are difficult decisions to make but necessary.
“Some subsidies on unga, fuel, and electricity were not informed by the science of our economy, but were informed by the expediency of the political moment that existed at that time.” The president affirmed.
He added that: “”We had to do away with those subsidies because they would cost our economy big time. We would be spending up to Ksh. 25 billion every month to subsidize some of the programs that were set out.”
Ruto said when he came into office, he had to make difficult decisions about the economy because “we were not doing well and we needed to change the foundation of our economy. I found that there were decisions that were made for political expediency for that time, because we had an election.” He added.
Late last month, the International Monetary Fund (IMF) Executive Board has approved a Sh55.1 billion ($447.39 million) loan to Kenya paving way for immediate release of the funds to the exchequer for budgetary support.
This follows the fourth review of the $2.34 billion (Sh288 billion) 38-month Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) arrangements with Kenya.
This brings Kenya’s cumulative disbursements under the EFF/ECF arrangements to about $1.655 billion (Sh203.84 billion)
The loan which was approved in April 2021 aims to support Kenya’s program to address debt vulnerabilities, the’ response to the Covid-19 pandemic and global shocks, and to enhance governance and broader economic reforms.
The IMF noted that Kenya’s economy remains stable and projects it to grow by 5.3 per cent this year despite a challenging global environment but warned that climate-related risks are elevated in the medium-term.
Beginning today, electricity consumers will pay more than 200 per cent more which translates to a threefold increment for electricity from 5 per cent to 15 per cent after President Ruto opted against extending a multibillion-shilling subsidy initiated by his predecessor, Uhuru Kenyatta.
Energy and Petroleum Regulatory Authority (Epra) Director-General Daniel Kiptoo said the 15 percent discount would not be extended beyond its expiry date of December 31, 2021 setting the stage for costly electricity and pressure on the sky-high inflation.
President Ruto has been against subsidies imposed by Kenyatta on items like petrol and staple maize food, terming them unsustainable.
Some of the key challenges the new president faces include bringing down the high cost of fuel and food that have pushed inflation to a five-year high, while grappling with subsidy measures that policymakers warn could empty the country’s coffers.
Similarly, effective today, any transfer of money from a bank account to money wallets such as MPesa, Airtel will attract a 20 per cent excise fee.
Different commercial banks have been sending text messages to their customers reminding them of the directive issued by the Central Bank of Kenya.
“Dear Member, we wish to notify you that effective January 1, 2023, transactions between bank and mobile money wallets will be charged following the recent announcement by Central Bank of Kenya. For queries call 0763000000,” reads a text from Equity bank.
CBK had earlier announced it planned to reintroduce the charges on transactions between mobile money wallets and bank accounts which had been waived on March 16, 2020.
This was three days after the Covid-19 pandemic was announced in Kenya.
