President William Ruto has accused his predecessor’s administration of presiding over a parallel foreign exchange market and hiding more than Sh200 billion in pending bills from the current budget.
Dr Ruto, who took power last September, has accused the Uhuru Kenyatta administration of presiding over a government that was shrouded in opacity following the “handshake” with opposition chief Raila Odinga.
In a rare contradiction to Central Bank of Kenya governor Patrick Njoroge, whose eight-year reign ends next month, the President said Kenya last year ran an artificial exchange rate market, which caused a biting shortage of fuel resulting in rationing of the essential commodity.
The President now says when he took over, he discovered the problem was caused by a parallel exchange rate that saw lenders buying and selling the US dollar at levels well above the official rates printed by the CBK.
“We discovered there wasn’t a fuel [shortage] problem. It was a misdiagnosis. The problem was economic and much more a dollar problem.
Read: Ruto ejects over 120 Uhuru allies in parastatal changes
“There was a fuel that had come, but the oil marketers could not find the dollars to go and buy because the government was maintaining an artificial rate,” Dr Ruto told a media engagement session Sunday night.
“There were two parallel rates. There was a dollar by the government, which they said was Sh120 and there was another. If you really wanted to go and get the dollars, then you really had to go and get it at 128 or thereabout.”
Importers such as oil marketers and manufacturers last year complained of a gaping mismatch in demand and supply of the US currency, prompting them to buy it in batches and levels way above the official rate.
Dr Njoroge, the CBK chief, however, has on several occasions denied undue interference in the market, adding that there were enough dollars in the market and that the regulator was merely playing its role of enforcing discipline.
The President further accused his predecessor’s regime of hiding about Sh220 billion non-debt arrears when they presented the budget, signalling the bills were to be cleared later through increased borrowing.
“When we came to the office we found they had not factored about Sh130 billion of pending bills and almost Sh90 billion that was meant to be given to the counties,” Dr Ruto said.
“They were hiding figures and that’s why I want to run a transparent government, I want to run a government that’s accountable.”
The Ruto administration told the International Monetary Fund last October they inherited Sh279.26 billion non-debt payments from the previous regime in arrears which were either carried over from the previous financial year ended June 2022 or unbudgeted like the Sh20 billion Hustler Fund.
“They [Uhuru regime] had budgeted to borrow Sh1.1 trillion [this financial year ending June]. When I came, using the supplementary budget, I cut it down by Sh300 billion,” he said.
“But you see the train had left the station so the borrowing was more because of the budget that was read and passed by Parliament.”
The President’s admission appears to vindicate South Africa’s Standard Bank which had in a past research note warned a parallel exchange rate was emerging in Kenya.
The CBK rebuked the lender’s local unit, Stanbic Bank, forcing it to issue a public statement distancing itself from the parent’s research note.
Read: Ruto tweaks Uhuru budget, grows recurrent by Sh87.6bn
A parallel exchange rate market develops, in such circumstances; and when the spread between the official and parallel rates is both substantial and sustained, according to an IMF working paper.
The Kenya Association of Kenya last year said the dollar crunch strained relations with suppliers, at a time competition for raw materials had intensified globally due to rising demand amid lingering supply chain constraints.
→ [email protected]