Kenya’s President William Ruto said he has mapped a path to urgently improve the nation’s fiscal position in a bid to avoid the economic crises that befell emerging and frontier markets this year.
Ruto targets to nearly triple annual tax collections to 5 trillion shillings ($40.6 billion) in five years, he said in an interview on Friday in Washington DC where he attended the US-Africa Leaders Summit.
The overarching plan is to ease the financial burden on a nation that currently spends more than half of its tax revenue on servicing liabilities, and the International Monetary Fund said is at a high risk of debt distress.
“I am very confident that our debt situation is going to change significantly because we have begun to make the right decisions,” Ruto said.
The president, who came into office three months ago, intends to digitize the provision of all government services in order to ease revenue collection and close spending leakages. He reiterated a plan to cut the 2022-23 budget by about $3 billion, partly by halting some fuel and food subsidies.
The measures could help Kenya achieve a target of raising its tax revenue to 25% of gross domestic product from 15% in the fiscal year that ended in June.
Ruto’s comments come into focus as nations from Ghana to Ethiopia and Pakistan face or are already struggling with debt crises, with several emerging markets dollar debt trading at distressed levels. The urgency for fiscal consolidation in Kenya was renewed on Dec. 14 when Fitch Ratings downgraded the nation’s credit rating to B from B+ because its high debt and increase in borrowing costs limits access to global markets.
Kenya’s dollar debt, including a $2 billion Eurobond maturing in June 2024, could add pressure to its foreign reserves, according to Fitch.
The government has signed up to a $2.34 billion IMF program to help reduce debt risks.
Ruto met with company executives in the US as he looks to boost private capital inflows to ensure the economy continues to grow and create jobs. He asked investors to support his plans to deliver 200,000 affordable housing units annually and build water dams in projects he said promised returns and employment.
Ruto also said that regional leaders are discussing a plan to develop an 800-kilometer highway connecting the Kenyan port of Mombasa on Indian Ocean coastline and the Atlantic Ocean in west Africa, as part of plans to facilitate intra-Africa trade.
©2022 Bloomberg L.P.
