Kenya to Slash Spending, Increase Borrowing After Deadly Tax Protest

Kenya’s National Treasury will significantly reduce expenditure and take on additional loans to compensate for the revenue plans it was forced to abandon following deadly protests.

The government initially planned to introduce new taxes to raise 346 billion shillings ($2.7 billion) in the fiscal year beginning July 1.

However, these plans were scrapped after violent demonstrations resulted in the deaths of at least 41 people.

In a live address on Friday, President William Ruto announced that the Treasury would cut expenditure by 177 billion shillings and borrow the remaining amount.

“We would be proposing to the National Assembly a budget cut of not the entire 346, but a budget cut of 177 billion and borrowing the difference,” Ruto said.

“Cutting the entire amount in our assessment would significantly and drastically affect the delivery of critical government services, while borrowing the whole amount in full will occasion a fiscal deficit by a margin that would have significant repercussions on many sectors, including our exchange rate and interest rates.”

The revised fiscal strategy will increase the budget deficit for 2024-25 to 4.6% of gross domestic product, compared with an earlier estimate of 3.3%, Ruto noted.

Also, the president stated that he would appoint a panel to carry out a forensic audit of the nation’s debt.

The borrowed funds will enable the government to continue with plans to hire tens of thousands of junior secondary school teachers, write off debt owed by coffee farms, retain a fertilizer subsidy, and settle arrears owed to counties and for pensions.

The government will also dissolve 47 state corporations with overlapping functions, he added.

In an effort to directly engage with citizens, Ruto held a two-hour-long X Spaces session, where he addressed questions from protesters.

As many as 3.3 million people tuned in, according to the social-media platform. During the session, Ruto fielded questions on a range of topics, including deaths during protests, alleged abductions of protesters by police, corruption by public officials, unemployment, and the economy.

“We didn’t do as much communication as we should have, and that is a regret that I have admitted,” Ruto said, acknowledging the government’s failure to effectively promote his economic agenda.

Odanga Madung, a researcher at web browser maker Mozilla, said “Taking to X to address his citizens just shows how bad his communication team is, as social media has been the cradle of the protests,” Madung said by phone.

“He needs to stop all the pandering and respond to Kenyans’ concerns by taking direct action on the issues they are concerned about.”

The government’s revised fiscal plan reflects the complex challenges Kenya faces as it navigates economic instability and public unrest.