In response to economic turbulence, Kenyan authorities have elected to privatise 35 state-owned enterprises and are evaluating the prospect of broadening the capital of an additional 100 companies, according to the country’s President William Ruto. This decision arrives at a point when Kenya grapples with liquidity problems and economic hardships.
The Kenyan economy, which propels the East Africa’s economic engine, has been severely impacted by the dual pressures of the global COVID pandemic and the ongoing conflict in Ukraine. Additionally, the nation is combating one of the worst droughts in its history, exacerbating its situation.
Statistical data from Kenya’s Treasury as of June’s end reveals that the nation, with a population of approximately 53 million, carries a public debt exceeding 10,100 billion shillings (equivalent to €64.4 billion). This debt reflects nearly two-thirds of Kenya’s gross domestic product. President Ruto addressed the business community saying, “We have pinpointed the inaugural 35 companies that will be offered to the private sector, and are looking at nearly 100 others.”
The International Monetary Fund (IMF) recently exhorted Kenyan authorities to reform their state-owned enterprises. The IMF primarily highlighted the dire situation of the national electricity supplier, Kenya Power, and the flag carrier, Kenya Airways, both of which reported record losses in 2022.
In an effort to streamline privatisation, the President ratified a law last month aimed at facilitating the process. “Several lucrative public enterprises are hampered by government red tape, while their services can be better rendered by the private sector,” President Ruto contended.
In November, the IMF conformed to a loan agreement worth $938 million for Kenya, intended to help the nation repay a $2 billion Eurobond due next year. Shortly after this, on 20th November, the World Bank promised to bolster Kenya with fiscal support amounting to $12 billion over the forthcoming three years.
Kenya’s government, led by President William Ruto, is aiming to decrease its debt. To achieve this, a new, and generally unpopular, budget has been prepared. The budget anticipates generating 289 billion shillings (around €2 billion) via several new taxes. This will augment the budget earmarked for 2023-24, which currently stands at 3,600 billion shillings (approximately €24 billion). The introduction of new levies has triggered sometimes violent public demonstrations, displaying the population’s dissatisfaction with the administration’s ongoing efforts to confront the nation’s economic troubles.
It remains to be seen how these fiscal measures and the privatisation of state-owned businesses will affect Kenya’s economic trajectory in the long term. As the East African powerhouse navigates its current financial storm, the privatisation strategy could be a pivotal factor in defining the nation’s future.
