Ruto's economic team must use its space responsibly

CBK Governor Kamau Thugge. [Boniface Okendo, Standard]

Credit where it is due. Through thick and thin, President William Ruto's economic team has solved the biggest problem it inherited from the Uhuru Kenyatta administration.

In June of this year we were due to pay 2 billion dollars to settle the controversial Eurobond debt, an undertaking that for a long time was put in doubt by high interest rates in global debt markets and declining exports.

Default and a tarnished global reputation were on the cards, especially after a similar fate befell Ethiopia, Ghana and Zambia.

Since taking office, the President has gone well out of his way - including by participating in controversial Western projects like the moribund police mission to Haiti - to be friendly to Western governments.

This has enabled the administration remain in the good books of the Bretton Woods institutions in Washington, DC and to buy us ever more fiscal space, albeit at the expense of domestic policy autonomy.

The President also stiffed Kenyans with ever higher taxes, even as he failed to rein in spending and grand corruption allegedly orchestrated by senior members of his administration.

Understandably, Kenyans bristled at the idea of paying an arm and a leg for a scarcely effective corrupt government. From education to healthcare to regulation, essential government services are in free fall.

Meanwhile, the government has been singularly focused on raising revenue to meet targets set by the International Monetary Fund (IMF).

All this to say it has been a messy 18 months. Yet events this week vindicated the President's economic team. The administration's Eurobond was oversubscribed, signaling credit markets' willingness to bet on the Kenyan economy.

The implied yield on the debt was usurious, but it buys us time and the possibility of refinancing at a lower rate in future.

It also means the government will be able to roll over existing debt without strangling the economy. We are not out of the woods yet, but credit where it is due.

The next step will be even more important and present the hardest test yet for the President and his team. Failure is not an option.

Not when we are borrowing money at more than 10 per cent in foreign markets and more than 18 per cent domestically. The only option is to invest in broad-based economic growth and to improve our people's well-being.

-The writer is an Associate Professor at Georgetown University