Bullish Ruto, ‘broke’ Njuguna Ndung’u: Who is fooling whom on state of the economy?

President William Ruto and the two men at the helm of Kenya’s monetary policy have given conflicting signals on the state of the economy, failing to inspire hope amid the high cost of living, heavy taxation and a shilling on freefall.

Dr Ruto remains bullish, insisting that Kenya is on the right trajectory and that the economy has stabilised.

However, Central Bank of Kenya (CBK) Governor Kamau Thugge and Treasury Cabinet Secretary Njuguna Ndung’u give a different story.

On Wednesday, Prof Ndung’u said the government is broke, adding that the National Treasury is even having difficulties settling salaries.

He blamed the situation on the huge debt-servicing obligations that have put pressure on below-par revenue collection.

A day earlier, MPs staged a walkout following delays in disbursing the National Government Constituency Development Fund (NGCDF) amounts.

Also Read: MPs plot to impeach Njuguna Ndung’u, Kamau Thugge over shilling free fall

“We are not getting adequate tax revenues. I can tell you, we even have trouble with salaries. We are clearing salaries with arrears. Imagine that,” Prof Ndung’u told the lawmakers.

Two days later, President Ruto said all is well and assured MPs that the Sh9 billion NG-CDF funds they had paralysed Parliament business over would be released “soon”.

Kenya spent 67.5 per cent of tax revenues to service domestic and external debts between July and September.

Debt repayment hit a record Sh347.22 billion in the three months to September, out of the Sh514.26 billion collected by the Kenya Revenue Authority (KRA).

Emergency loans that Treasury taps from the CBK hit a record Sh85.12 billion on November 10.

The loans largely help Treasury to finance short-term needs when it faces a cash shortages, including requirements like salaries.

Prof Ndung’u’s remarks came in the same week that the CBK hiked the increased the benchmark lending rate to 12.5 per cent from 10.5, the highest since September 5, 2012 when it was at 13 per cent.

The hike in the CBK base lending rate sets the stage for tougher times ahead for borrowers amid income squeezed by new taxes and the high cost of living.

Also Read: Shilling tipped to weaken further on low forex inflows

“The Monetary Policy Committee noted that public sector external debt service has risen, thereby offsetting some of the gains made towards the strong fiscal consolidation,” Dr Thugge said in a report week.

“The continued weakening of the exchange rate is contributing to a significant increase in the shilling value of foreign currency-denominated debt.”

President Ruto recently said the journey to transforming the country is on, comments that have done little to cheer Kenyans battling the tough economic times.

“Despite the enormous challenges and difficulties, we have made encouraging progress. This has not only vindicated our philosophy of inclusive transformation in the pursuit of shared prosperity, but it has also increased confidence that we are on the right path and shall, in due course, deliver the transformation of our nation in full, ” he said.

Experts fault the administration for the conflicting signals, saying it hurts the chances of inspiring confidence in investors.

Mr Ken Gichinga, the chief economist at Mentoria Economics, says the contradictory statements point to a government attempting to achieve two objectives at the same time but getting it all wrong.

“The President is trying to inspire hope to investors because such sentiments play a big role in investor confidence. The second goal has to do with the Treasury Cabinet Secretary who has to deal with the day-to-day challenges and reality of a very difficult business environment,” Mr Gichinga told the Sunday Nation.

“Unfortunately, this is generating confusion because it can fuel panic. It is not good for our economy.”

The Federation of Kenyan Employers (FKE), the lobby for the private sector, says the country is sinking, adding that leaders need a quick rethink.

Also Read:President Ruto’s struggles with unfulfilled promises

FKE Director and Chief Executive, Jacqueline Mugo, says a majority of employers are talking of retrenching staff to remain afloat, blaming the situation on heavy taxation.

“The economy is in distress. That is seen in profit warnings by listed companies. Three per cent of corporates have declared redundancies, leading to 70,000 job losses. Forty per cent of our members are now reviewing their operational costs,” Ms Mugo said.

“Let us stop deluding ourselves. Even the distress itself is getting out of hand. The housing levy piled pressure on distressed employers. More taxes to fund health care are on the way.”

She says Kenyans never asked for the houses from the state.

“The government is forcing people to pay for houses many will never get. Why is housing a priority?” she asked.

Dr Ruto said on Friday that the National Treasury would disburse cash for the NG-CDF by end of January, moving to calm jitters among lawmakers.

MPs had on Tuesday walked out of the National Assembly protesting delays in disbursement of Sh53.3 billion for the NG-CDF.

“Do not worry. The money for you to disburse for bursary will be in the accounts before schools reopen for the new academic year,” the President said.

Also Read: Prepare for tough times ahead - President Ruto’s caution to Kenyans

“I want to assure MPs that there are resources for our children to go to school. That is not negotiable.”

Prof Ndung’u had asked lawmakers the previous day to be patient.

“We are going to ride over this (NG-CDF money). In the meantime, we are begging for time. We want to ensure the solution does not ignite solvency challenges,” the National Treasury chief told the agitated MPs.

Devolved governments are also battling cash disbursement challenges by the National Treasury.

The opposition and analysts are raising questions about why the President remains confident when the man at the helm of the National Treasury says the country is in a crisis.

[email protected]