Ruto: How I intend to change Kenya

In his inaugural address to Parliament two weeks after taking over, Ruto raised the red flag on the country's financial health, saying the government must be brought back to “sanity”.

“I have news, and it is not very good news. Our financial situation is not very good,” Ruto told a joint sitting. He deplored the debt appetite of the Kenyatta administration which he served as Deputy President.

“Over the last decade, we have sought to close this gap [budget deficit] with public borrowing. This year alone, we budgeted to borrow Sh900 billion to finance both development and recurrent expenditure,” he revealed.

“The government should never borrow to finance recurrent expenditure. This is not right, prudent or sustainable, it is simply wrong. We must bring ourselves back to sanity.”

In the immediate term, Ruto wants MPs to reduce recurrent spending by Sh300 billion, signalling the tough times awaiting ministries and state agencies.

In his big plan, Ruto says Kenya should have a recurrent budget surplus only after three years of his administration.

“Over the next three years, we must reverse this and go back to the situation where government contributes to the national savings effort by keeping recurrent expenditure below revenue," the President said..

"To this end, I have instructed the National Treasury to work with ministries to find savings of Sh300 billion in this year's budget. Next year, we will bring it further down so that, by the third year, we have a recurrent budget surplus,” he said.

As part of his turnaround plan, Ruto said his government will cut down on borrowing, overhaul social security, incentivise saving, unlock housing and promote the “hustler” economy, including rolling out the Sh50 billion Hustler Fund.

The head of state also promised to make credit affordable, abandon subsidies and invest in production, make universal health coverage a reality and explore public-private partnership funding for large capital projects.

Atop the President's agenda is the overhaul of the National Social Security Fund  by increasing the amount Kenyans save.

He plans to introduce incentives to contributors.

The President said Kenyans are not saving enough to enable the country sustain itself and grow into an upper-middle income economy.

“Our current national savings rate is below 10 per cent of our GDP, which translates to an investment-savings deficit of 15 per cent of GDP,” President Ruto said.

To shore up NSSF savings, the President said his administration would introduce an incentive whereby contributors would get Sh1 for every Sh2 they save.

“I will be proposing a national savings drive to encourage those in the informal sector to set up their retirement savings plans.”

“For every two shillings saved in the scheme, up to a maximum of Sh6,000 a year, the government will contribute one shilling,” Ruto said, arguing that the current NSSF plan has excluded the vast majority of working Kenyans.

The President further revealed he has embarked on steps to overhaul the National Health Insurance Fund.

“We will restructure our primary health system for preventive and early diagnosis. NHIF will be restructured for efficiency and make it a fit-for-purpose social insurance scheme that caters for all, including those with chronic diseases,” Ruto said.

In the same vein, he said the Kenya Kwanza administration will reduce government borrowing from local banks, a situation he said has crowded out local businesses from accessing loans.

“It will encourage banks to go back to lending to businesses and also bring down interest rates so that the private sector can also contribute to reducing the savings-investment deficit,” the President added.

Ruto promised a radical shift from the current taxation regime that, he argued, burdened traders as the wealthy enjoy tax holidays.

He said his administration, through the support of MPs, would push for a “tax system that is responsive to the needs of the economy".

“It must be equitable, efficient and customer-friendly,” Ruto said, adding that the core of equitable taxation is that the burden should reflect one’s ability to pay. 

“Our tax regime currently falls far short of this. We are over-taxing trade and under-taxing wealth. We will be proposing tax measures that begin to move us in the right direction,” the President said.

Ruto also hinted at radical reforms at to make Kenya Revenue Authority ‘people-friendly’ and rename it the “Kenya Revenue Service".

The President announced he would bring to the House, legislative instruments for establishment of the Hustler Fund, which would be allocated Sh50 billion every year.

Ruto further disclosed he would rely on Parliament to help “resolve systemic issues of limited access to affordable housing".

Former President Uhuru Kenyatta failed in his bid for 500,000 houses by end of his second term, but the Covid pandemic and global slump slowed it down.

Ruto said he has a plan to get out of the quagmire, saying his administration would provide land and stable funding for mass housing.

The President said he’d bring legislative proposals to provide a framework for a housing off-take plan.

“This will create incentives for developers to invest more money into our housing strategy on the strength of guaranteed off-take of the completed units,” he said.

For mega infrastructure projects, the President said he would take the public private partnership approach, underscoring the crucial roles MPs would play to help him achieve aspects of the "The Plan".

Most of Uhuru’s projects, notably the standard gauge railway, were funded by borrowed monies, save for the Nairobi Expressway.

To scale up access to water, for instance, Ruto said work was already underway to enter into water purchasing agreements with investors.

“This way, we will achieve water for all in less than a decade,” Ruto said. He indicated his plan to increase access to 80 per cent requires Sh500 billion, which the government cannot raise at once.

To improve accountability, Ruto asked MPs to consider changing the House rules to allow ministers to appear in Parliament to respond to queries.

The President also hinted at backing MPs in their quest for retention of the National Government-Constituency Development Fund (NG-CDF).

Recently, Treasury froze the funds citing the Supreme Court ruling that declared one of the laws establishing the fund unconstitutional.

But Ruto, saying he knows the difference CDF makes, asked MPs to realign the kitty to the Constitution.

“I believe there is a way NG-CDF can be aligned to the tenets of the Constitution.”

The President also promised additional funding for both Houses of Parliament, including the creation of the Senate Oversight Fund for checks on county spending.

He made the remarks to a packed house in a joint sitting which was also attended by Deputy President Rigathi Gachagua, Chief Justice Martha Koome, security chiefs, IEBC chairman Wafula Chebukati and Cabinet Secretary nominees including former Speaker Justin Muturi.

The President also moved to assure MPs that he would run a clean and accountable administration.

“I will run an administration that is open, that is transparent,” he said, further calling on the opposition to step up to the plate and deliver their bid to Kenyans.

The President also called upon MPs to play their oversight to “make sure the public gets value for every cent invested in every policy, program and project".

Ruto said this was among the reasons he wants Cabinet Secretaries to take questions from members in plenary.

“On this matter of oversight and holding government accountable, my administration commits to restore the place of Parliament in our democracy by respecting the autonomy and oversight authority of Parliament on the Executive,” he said.