Ruto's high stakes fiscal gamble in bid to implement election pledges

President William Ruto faces dwindling fiscal options and growing political headwinds as Kenya’s economy slows and an elections just 16 months away.

On Friday, during Murang'a County tour, the president accompanied by his Deputy Kithure Kindiki and local leaders wore a hard hat and greeted local residents as banners bearing his portrait fluttered behind him.  

He promised new markets, roads, clean water and more prosperity during the latest in a series of development tours that analysts say double as campaign stops in vote-rich regions. 

Ruto’s tours —Murang'a on Friday, Kisii recently, Nakuru next— are heavy on fresh promises. 

Behind the scenes, however, his government is confronting a financial crisis to implement his rosy promises, insiders and analysts say.  

This comes at a time talks with the International Monetary Fund have stalled and efforts to increase government revenues have flopped.

The economy is also struggling with fresh external shocks over the Middle East conflict even as public debt pressures mount. 

The Washington-based lender  has frozen discussions on a new financing programme until Kenya addresses delayed governance diagnostics and classifies an estimated Sh335 billion in securitised infrastructure funding as public debt.

The Treasury Cabinet Secretary John Mbadi has resisted, arguing the structures pose no fiscal risk. The impasse has pushed talks into 2027, an election year – government officials say. 

Public debt hovers near 70 per cent of gross domestic product, and debt servicing has absorbed almost 80 per cent of tax revenues so far this fiscal year.  

The shilling remains under pressure as external shocks, including rising oil prices driven by Middle East tensions, fuel inflationary pressure. 

Domestic borrowing, projected above Sh1 trillion in 2026/27, is squeezing credit to the private sector, with commercial lending rates above 14.8 per cent. 

With IMF lending off the table and tax hikes politically untenable after deadly protests in 2024, Ruto’s administration has turned to privatisation to raise cash. 

In March, the government netted Sh103.45 billion from selling a 65 per cent stake in Kenya Pipeline Company (KPC) through the country’s first major initial public offering in two decades, which was oversubscribed at 105.7 per cent.  

Another Sh244 billion is expected from the planned sale of a 15 per cent stake in Safaricom to South Africa’s Vodacom Group. 

But analysts say both deals were years in the making.  

The KPC listing took 18 months from planning to payout, while the Safaricom transaction may not close until late 2026, leaving little runway before the August 2027 vote, caution analysts.  

Kenya’s broader privatisation plan launched in 2008 and targeting 26 state entities has produced just one completed deal in nearly two decades. 

“Privatisation proceeds are one-off revenues. You cannot run a government on one-off revenues,” said Ian Njoroge, an independent economist. “And 16 months is not enough to prepare and sell another KPC.” 

As relations with the IMF cool, Ruto is courting regional lenders and private investors.  

At this month’s Africa We Build Summit in Nairobi, he urged the continent to rely less on “external capital whose primary interest is securing raw materials.” 

He highlighted Kenya’s new National Infrastructure Fund, seeded with KPC proceeds, and a proposed Sovereign Wealth Fund intended to mobilise an estimated Sh5 trillion over the next decade. 

On the sidelines, the President said Kenya would invest in Uganda’s planned oil refinery – a project exceeding half a trillion shillings – after Kampala acquired a 20 per cent stake in KPC.  

Ruto and Ugandan President Yoweri Museveni also discussed a partnership with Nigerian industrialist Aliko Dangote to build a 650,000-barrel-per-day refinery in Tanzania, linked by a pipeline to Mombasa. 

“African industrialists and institutions like AFC see it as their responsibility to invest in this infrastructure,” Ruto said.

Dangote pledged to replicate his Lagos refinery within five years if several governments back the plan. 

Regional development financiers have provided modest but symbolically important support.  

The African Development Bank recently approved a $16.5 million loan for a 35-megawatt geothermal plant at Menengai, part of Kenya’s push to double geothermal capacity by 2030.  

Afreximbank, together with Arise IIP of Dubai and KCB Group, is planning an $800 million facility to fund new industrial parks expected to attract $3 billion in investment. 

Even so, these sums barely dent Kenya’s infrastructure deficit.  

The AfDB’s geothermal loan covers less than one per cent of the financing gap, while the Afreximbank-backed parks will take years to materialise. The regional refinery plans remain at concept stage. 

Revenue collections by the Kenya Revenue Authority fell short of target by Sh84 billion in the nine months to March, and a fuel-tax cut rushed through parliament this month threatens to deepen the shortfall.  

The Sh103 billion from the KPC sale equates to about two months of debt-service payments. 

“The president is trying to campaign on infrastructure that hasn’t been built yet,” said a Nairobi-based political analyst who requested anonymity. “He’s selling assets to pay old debts, not to build new roads.” 

The IMF’s Africa department head said any future programme will depend on a “credible fiscal consolidation path” a condition analysts view as politically risky in an election cycle. 

Ruto still points to the National Infrastructure Fund as a foundation for future growth and to the KPC and Safaricom deals as proof of innovative financing.

He promotes regional energy ventures as symbols of self-reliance. 

But large-scale infrastructure takes years and the president has only 16 months, analysts say. Fiscal tightening risks political backlash, they add. Asset sales are a one-time fix. And the IMF is in no hurry.