Cost of living: Mbadi defends policy stance

The National Treasury on Thursday defended government policies that it said have had the effect of putting money in the pockets of Kenyans.

This is amid the general feeling among many Kenyans that their situation has gotten worse under the Kenya Kwanza regime.

Treasury Cabinet Secretary John Mbadi led senior officials from the Ministry in a forum where he outlined the measures put in place and aimed at easing the cost of living for Kenyans as well as increasing money in circulation. 

Among the measures he cited was the lowering of the Central Bank Rate, which is expected to see banks lower the cost of loans and easing of food and energy prices due to government interventions – a move he said saw the cost of living drop to 3.3 per cent in January. 

The CS said these and other measures such as stabilising the shilling against major currencies and improved fiscal discipline within the government have seen it reduce borrowing. 

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“The government has your back. We are not oblivious to your realities,” said Mr Mbadi at a press briefing in Nairobi.

But despite these measures, many Kenyans might not be feeling the change. Banks, for instance, only lowered lending rates this week after the Central Bank of Kenya (CBK) threatened them with penalties.

CBK’s Monetary Policy Committee has been lowering the CBR since August last year.

In different surveys last year, including one in December, the cost of living has been a key concern for Kenyans despite the reduction in inflation throughout 2024.

In the December survey by Infotrack, 51 per cent of Kenyans interviewed cited the cost of living as their biggest concern. Other issues were unemployment (36 per cent), corruption (24 per cent) and over-taxation (23 per cent). 

“This macroeconomic performance must then translate to liquidity. This is the question that many Kenyans have been asking – that we are not feeling the money in our pockets despite the fundamentals showing positive signs,” said the CS, adding that the impact could be felt in the coming months as banks reduce lending rates and government settles pending bills.

“Interest rates have started reducing in line with the easing of the monetary policy. The reduction of interest rates by banks is likely to expand credit to the private sector, encouraging investments, creating jobs and improving the general liquidity in the general economy.”

Mr Mbadi also noted that the Tax Laws Amendment Act 2024 was aimed at easing pressure on pay slips and had the impact of slightly reducing the tax burden for employed Kenyans.

“We will still take more measures that we think will help Kenyans have more money in their pockets but already there are steps we have taken,” he said.

“Contrary to the perception that we are bringing taxes that will burden Kenyans, we have brought proposals which were making Kenyans have more money in their pockets.”