In a dramatic turn of events, Kenya’s government announced plans to trim its 2024-25 spending by 1.9% and expand the fiscal deficit to 3.6% of GDP. This revision, disclosed by the treasury, follows a tumultuous period marked by mass protests that forced President William Ruto to abandon unpopular tax hikes.
Ruto’s administration, reeling from public unrest, saw the President dismiss almost his entire cabinet last week. This sweeping action was aimed at creating a more inclusive government, a direct response to the mounting demands from protesters.
The public demonstrations, ignited by the now-scrapped tax increases, have since morphed into broader calls for Ruto’s resignation and sweeping political reforms to address entrenched corruption and mismanagement. Earlier this month, Ruto outlined a plan to balance the budget gap, nearly $2.7 billion, through a combination of spending cuts and increased borrowing.
The revised budget, which will be debated by lawmakers next week, was signed by Principal Treasury Secretary Chris Kiptoo on July 11 and posted on parliament’s website. It projects total spending at 3.87 trillion Kenyan shillings ($30 billion), down from the initial 3.99 trillion shillings ($31 billion). Kiptoo indicated that recurrent expenditure is expected to decrease by 2.1%, while development expenditure will see a significant reduction of 16.4%.
Adding to the financial strain, the energy regulator raised the road maintenance levy to 25 shillings per liter of fuel from 18 shillings, despite the retreat on tax hikes. This decision underscores the administration’s precarious balancing act between the demands of international lenders like the IMF, who advocate for deficit reduction, and a populace grappling with high living costs.
The IMF, on its part, acknowledged the evolving situation in Kenya, stating on Thursday that it is reassessing the circumstances to adapt its approach accordingly.
As Ruto navigates this crisis, his leadership faces a critical test. The coming weeks in parliament will not only shape Kenya’s fiscal path but also determine the political future of a presidency under siege.
(Source: Business Live | African News | U.S. News & World Report)
