President William Ruto unveiled plans on Monday, May 20, to write off Ksh6 billion in debt held by coffee farmers, aiming to rejuvenate the struggling sector and boost the livelihoods of over 600,000 farmers.
Speaking to Kenyans residing in the United States, Ruto stated, "In the next Cabinet meeting, we will approve a write-off of Ksh6 billion to our farmers, so that we can reduce debts on coffee farming." This announcement is part of the ongoing coffee reforms intended to expand cultivation acreage and enhance farmer revenues.
Coffee, Kenya’s third-largest agricultural export, has faced significant challenges despite employing a substantial portion of the population, with 75 per cent of farmers being smallholders. The sector has struggled with low production and financial instability, prompting the government to take decisive action.
The debt relief plan, initially proposed in January by Co-operatives and Micro and Small Enterprise Cabinet Secretary Simon Chelugui, gained momentum with Deputy President Rigathi Gachagua’s discussions with coffee sector stakeholders. Chelugui indicated that the government might consider waiving additional phases of debts owed by coffee farmers.
In April, Chelugui announced a forensic audit of the Ksh4 billion debt that coffee farmers owe various value chain players. The audit aimed to verify the exact amount overdue and to identify any debts previously waived.
Chelugui noted, "We are currently undertaking forensic audit data we have received from Co-operative Bank, co-operative unions, and commodity fund. The aim of the verification process is to ascertain the true picture in terms of the amount overdue and whether there are debts that were waived last time."
Upon concluding the verification process, the ministry will prepare a memo for Cabinet discussion and approval. The approval would authorise the National Treasury and Planning Cabinet Secretary to officially waive the debts.
The debt waiver initiative dates back to former President Mwai Kibaki’s administration in 2006, which aimed to help local farmers overcome growth barriers. Between 2006 and 2019, the government waived Ksh12.2 billion, though these efforts reportedly failed to significantly boost the subsector.
The Kibaki administration also waived Ksh5.8 billion in Stabilisation of Export Earnings (STABEX) to Co-operative Bank, funds granted by the European Union to stabilize export earnings of the African, Caribbean, and Pacific Group of States. Additionally, Ksh4.7 billion was written off for rural Savings and Credit Cooperative Societies (Saccos) and farmers' co-operative unions in 2010, and Co-operative Bank received another Ksh1.7 billion.
President Ruto’s promise also included the establishment of a Ksh2 billion fund to support cherry farmers, providing financial cushioning while waiting for coffee auctions. This intervention is expected to alleviate the immediate financial pressures on farmers.
The Ksh2 billion fund is among the budgetary proposals for the Financial Year 2024-2025 and is subject to Parliamentary approval.
Despite these efforts, a report released in March 2024 highlighted mixed performance in the coffee sub-sector. While land under coffee cultivation increased by 2.1 per cent to 111,709 hectares in 2023, production dipped, according to the Agriculture and Food Authority.
Statistics from the National Coffee Directorate revealed that Kenya exported 47,861 metric tonnes of coffee valued at Ksh36.6 billion in the 2022/23 season. Coffee is grown in 33 counties, encompassing regions such as Central, Nairobi, North Rift, Central South Rift, Lower Eastern, Western, and Nyanza.
Kenya’s highest national coffee production was 128,862 metric tonnes during the 1987/1988 season. Harvests plummeted by nearly 64 per cent to an average of 45,000 tonnes before rising to 51,853 metric tonnes in 2021/2022.
