Kenya protesters push Ruto to take extra $1.6 billion budget hit
Kenya’s National Treasury warned that withdrawing controversial tax measures risks creating a 200 billion shilling ($1.6 billion) financing hole for a nation that’s had to seek a bailout from the International Monetary Fund.
Authorities in the East African nation have committed to dropping a raft of levies — including value added tax on bread and wealth levy on motor vehicles — after violent street protests this week in its two biggest cities. The measures and proposed expenditure cuts need to remain within budget-making laws, Treasury Secretary Njuguna Ndung’u said in a letter to lawmakers.
But protesters aren’t satisfied. They want President William Ruto’s government to scrap the entire plan to raise 302 billion shillings of new taxes, pledging to expand their agitation to eight towns on Thursday. Kenya has vowed to increase tax collections under the IMF program and reached a staff-level deal with the Washington-based lender to unlock more funding subject to the nation implementing fiscal measures.
“More borrowing appears inevitable,” and Kenya may be forced back to international capital markets, according to David Omojomolo, Africa economist at Capital Economics Ltd. That will be “tricky given yields are still quite expensive and concerns about Kenya’s fiscal sustainability beyond the near-term have not gone away,” he said.
The contentious budget is Ruto’s second since taking office in 2022. It projects revenue at a record 2.92 trillion shillings for the year beginning July.
A financing shortfall equivalent to 3.3% of gross domestic product — a significant drop from 5.7% in the current fiscal period — will be funded through both foreign and domestic borrowing.
