Kenya Stockholm Blog

In the bustling markets and quiet homes across Kenya, the common worker faces a relentless assault on their financial stability, exacerbated by an onerous tax regime and escalating living costs. The taxation structure that Kenyan workers grapple with is staggeringly progressive, extracting up to 35% of their income. This system imposes a 10% tax on the first KES 288,000 of annual taxable income, which quickly escalates to 25% and 30% on subsequent increments, ultimately peaking at a 35% rate for higher earnings. Additionally, the flat tax of 7.5% on residential rental income under KES 15 million as of 2024, though seemingly modest, adds another layer to the financial burden these individuals face. Such tax rates, paired with a mere KES 2,400 monthly personal relief, offer little respite to the average worker whose wages are already stretched thin.

Moreover, the cost of essential commodities such as milk, maize, and cooking gas is soaring, driven by a myriad of factors that include increased taxes, currency depreciation, and global market disruptions. For example, the retail price of milk has reached KES 131 per liter, and maize costs KES 74.4 per kg at retail, prices that are continually climbing and eroding the purchasing power of ordinary Kenyans. The situation with cooking gas is even more dire, with prices more than doubling recently, reflecting not only global economic pressures but also local policy decisions that disproportionately impact low- and middle-income households.

The culmination of these economic pressures—tax burdens, rising costs of living, and stagnant wages—paints a grim picture for the Kenyan worker. The inflation rate, peaking at an alarming 15.8% further underscores the severity of the situation. These workers are caught in a vicious cycle, where each day brings increased financial strain, making it increasingly difficult to afford basic necessities.

Aggressive Borrowing Strategy Amid Corruption in Government

Since President William Ruto took office, the Kenyan government has embarked on an ambitious borrowing spree, securing various loans and financial aids from international sources. However, this aggressive accumulation of debt has sparked a heated debate on the sustainability of Kenya’s financial future. The debt is eating into Kenya’s GDP, burdening the worker, plunging Kenya into deeper poverty and economic crisis while at the same time blocking any possibilities of wage hikes of workers to help address high inflation.

Notably, the government issued a $1.5 billion Eurobond in 2024 to help refinance existing debts. Additionally, it entered into an agreement to issue a $500 million Samurai bond aimed at supporting initiatives such as electric vehicles and energy efficiency. These bonds, while crucial for funding specific government initiatives, add substantial amounts to the national debt, raising questions about the long-term fiscal health of the country. The International Monetary Fund (IMF) has also played a significant role, approving a $624.5 million disbursement to assist Kenya’s financial challenges, with a total commitment exceeding $4.4 billion. Similarly, the World Bank and African Development Bank have extended significant loans, with $1.5 billion expected from the former and approximately $473 million secured from the latter for various development projects.

Additional financial support has come from a variety of international bodies. The Eastern and Southern African Trade and Development Bank provided a syndicated loan of Sh30.63 billion, primarily for development projects and debt management. The African Development Fund offered Sh5 billion for food and nutrition security initiatives in the Horn of Africa, while the Federal Republic of Germany loaned Sh2.5 billion for improving waste and water management in specific Kenyan counties. The International Fund for Agricultural Development (IFAD) contributed Sh2.59 billion to support rural financial inclusion and green investments, and Mizuho Bank Europe NV provided Sh2.7 billion for medical equipment and healthcare infrastructure upgrades. These loans, while intended to boost specific sectors, collectively contribute to the burgeoning national debt.

This aggressive borrowing strategy, while potentially bolstering development, raises alarms about the sustainability of Kenya’s debt. The sheer volume of loans, characterized by their varied purposes and the breadth of sources, not only increases the fiscal burden but also exposes the economy to heightened vulnerability concerning global financial shifts. Each loan, with its specific conditions and repayment demands, adds layers of complexity to the nation’s economic management. As these debts accumulate, they divert government resources from essential public services to debt servicing, thereby straining public budgets and limiting economic growth prospects.

The Central Organization of Trade Unions (COTU) in Kenya, under the leadership of Francis Atwoli, has increasingly shown a disheartening lack of vigor in championing the cause of workers. Despite its critical role as a defender of labor rights, COTU has seemingly become entangled with the regime in power, leading to accusations of its leadership being more aligned with political elites than the workers it purports to represent. This apparent complacency is glaringly evident during pivotal moments such as the recent doctors’ strike, where COTU’s silence was deafening, leaving the medical professionals to fend for themselves without the backing of their supposed advocates. The organization’s failure to robustly support such strikes not only undermines its credibility but also jeopardizes the livelihoods and well-being of countless workers who depend on its advocacy.

Worker’s Lack of Political Representation and the Way Forward

Compounding this issue is the glaring absence of a dedicated political party that genuinely represents the interests of workers in Kenya. Without a political voice, the workforce remains a marginalized group, whose interests are often overshadowed by broader political dynamics that cater to the affluent and powerful. The lack of a labor-centric party leaves a void in the political landscape, where workers’ rights and welfare should be vociferously defended. This absence dilutes their influence in shaping policies that directly affect their lives and livelihoods, perpetuating a cycle of neglect and exploitation. For Kenyan workers to truly thrive and for their rights to be safeguarded, there is an urgent need for a political revolution—a new movement rooted deeply in the principles of labor rights and dedicated exclusively to the empowerment and advancement of the working class.

In the meantime, the grim forecast for Kenyan workers will continues to darken as the prospect of wage increases becomes increasingly remote. Under the Ruto administration, rampant corruption exacerbates the situation, as the hefty loans intended for development are feared to be diverted into the abyss of graft. This misuse of borrowed funds not only thwarts potential improvements in living standards but also deepens the national debt crisis. As a substantial portion of the country’s GDP is siphoned off to service this escalating debt, the economic burden on the average worker intensifies, with little to no relief in sight. The continual exploitation of these funds, intended to elevate the populace, ensures that the cycle of financial hardship and inequality persists, entrenching the workers deeper into economic despair.

Moreover, the political landscape offers no solace, as workers remain egregiously underrepresented. Without a political party dedicated to labor issues, their plight is largely ignored, leaving them vulnerable and marginalized in decisions that affect their very survival. The soaring prices of basic commodities, driven by a government strategy focused more on political survival than on equitable economic policies, further diminishes the quality of life for the working class. As long as the current political and economic paradigms prevail, workers in Kenya face a future where exploitation is rampant, and their voices remain stifled. Only through a unified, vigorous effort to establish a political force that genuinely represents worker interests can there be any hope of reversing this dire trajectory and restoring dignity and fairness to Kenya’s labor force.

Okoth Osewe, Chairman, Kenya Red Alliance (KRA)