William Ruto Insists Kenya's Economy Is Stable, Claims Taxes Helped Country Get Out Of Debt Hole

• President William Ruto defended the introduction of high taxes under the Finance Act 2023, noting they were painful but necessary
• The head of state said the Kenya Kwanza Alliance government had to make sacrifices that would make Kenya's freedom fighters 'proud'
• He noted that the country was out of the debt distress risk, and inflation was declining despite high fuel prices

TUKO.co.ke journalist Japhet Ruto brings over eight years of experience in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.

President William Ruto has defended the raft of taxes introduced under the Finance Act 2023, insisting that they helped Kenya get out of a huge debt hole.

While addressing Kenyans during the 60th Jamhuri Day celebrations at Uhuru Gardens on Tuesday, December 12, the president defended the introduction of high taxes, noting they were painful but necessary.

Ruto, who rose to power on the premise of empowering people at the bottom, said his government had to make sacrifices that would make Kenya's freedom fighters 'proud'.

“The greatness and patriotic devotion of the people of Kenya have been on display during the past year. Together, we have made the right choices, sometimes taking very difficult and painful decisions, to steer Kenya back from the edge of the catastrophic cliff of debt distress, and move our nation in a new direction," Ruto explained.

What did William Ruto say about Kenya's economy?

Ruto sought to assure Kenyans that the economy was on a stable footing and on an upward trajectory.

He noted that the country was out of the debt distress risk, and inflation was declining despite high fuel prices.

"I can now confirm that Kenya is safely out of the danger of debt distress and that our economy is on a stable footing. Inflation is at 6.8%, down from 9.2% last year," Ruto said.

As of September 2023, the national debt stood at KSh 10.58 trillion.

Why taxes are hurting Kenyans

FX Pesa lead market analyst Rufas Kamau opined that taxes introduced under the Finance Act 2023 were hurting the economy.

Speaking to TUKO.co.ke, Kamau noted higher tax hikes will lead to lower revenue collection and fleeing investors.

He cited the doubling of the Valued Added Tax (VAT) on fuel as the main driver of slowed economic growth.

"The biggest tax on fuel is VAT which adds KSh 29.98 per litre of petrol. Heavy taxes on petrol impact production directly and they lead to lower economic production," Kamau said.

Why is Kenya's debt soaring?

Kamau explained that Kenya, like many other economies in the global south, has debts in US dollars.

This means that the country's obligations grow larger because it must spend more shillings to acquire an appreciating dollar and then use it to repay loans.

"On one side, the Kenya shilling is weakening because the US dollar is strong, and this applies to other major currencies against the US dollar. The US Fed raised interest rates by 425 basis points in 2022 effectively shifting rates from a limit of 0.25% to a limit of 4.5%. This tightening policy has strengthened the dollar and made US bonds attractive to international buyers.

"On one side, the Kenya shilling is weakening because the US dollar is strong, and this applies to other major currencies against the US dollar. The US Fed raised interest rates by 425 basis points in 2022 effectively shifting rates from a limit of 0.25% to a limit of 4.5%. This tightening policy has strengthened the dollar and made US bonds attractive to international buyers.