NAIROBI, July 5 – Kenyan President William Ruto announced on Friday significant spending cuts and increased borrowing to address a $2.7 billion budget shortfall. This move follows his decision to withdraw planned tax hikes due to nationwide protests.
The retraction of the finance bill, which included the tax increases, came in response to widespread, youth-led demonstrations. These protests, marking the most significant crisis of Ruto’s two-year presidency, resulted in at least 39 deaths and a temporary storming of parliament last week.
In a televised address, Ruto outlined his plan to seek parliamentary approval for spending cuts totaling 177 billion shillings ($1.39 billion) for the fiscal year that began this month. Additionally, the government plans to increase borrowing by about 169 billion shillings.
The president faces the dual challenge of meeting demands from international lenders like the International Monetary Fund (IMF) to reduce deficits, while addressing the economic hardships faced by the population due to rising living costs. Analysts suggest that the bill’s withdrawal might cause Kenya to miss its targets under the IMF program, though the government does not have immediate debt obligations needing urgent cash.
Kenya’s budget deficit is now projected at 4.6% of gross domestic product (GDP) for the 2024/25 financial year, up from an earlier estimate of 3.3%, Ruto stated.
To implement austerity measures, Ruto announced the dissolution of 47 state corporations, a 50% reduction in the number of government advisers, the suspension of non-essential travel by public officials, and the removal of budget allocations for the president and deputy president’s spouses.
