NAIROBI – Kenyan President William Ruto on Friday proposed significant spending cuts and additional borrowing to fill a nearly $2.7 billion budget gap. This gap was created after he withdrew planned tax hikes in response to widespread protests.
Ruto’s decision to scrap the finance bill, which contained the tax increases, came in the wake of mass demonstrations led predominantly by the youth. These protests have presented the biggest challenge to his presidency since he took office two years ago. At least 39 people were killed during clashes with the police, and some demonstrators briefly stormed the parliament last week.
In a televised address, Ruto announced he would ask parliament for spending cuts totaling 177 billion shillings ($1.39 billion) for the fiscal year that began this month. Additionally, the government would increase borrowing by about 169 billion shillings.
Caught between the demands of lenders such as the International Monetary Fund (IMF) to cut deficits and a population struggling with rising living costs, Ruto’s decision to withdraw the bill is likely to impact Kenya’s IMF program targets. However, the government does not have immediate debt obligations that require 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 said.
Austerity measures proposed by the president include:
The dissolution of 47 state corporations
A 50% reduction in the number of government advisers
Suspension of non-essential travel by public office bearers
Removal of budget lines for the president and deputy president’s spouses
“I believe these changes will set our country on a trajectory towards economic transformation,” Ruto stated. He also announced a forensic audit of the country’s debt, which stands at more than 70% of GDP, and said he would soon announce changes to the government.
Following his speech, Ruto hosted a live audio forum on X to engage with young people. However, technical difficulties were reported, with many users unable to join. Leading activists involved in the protests had called for a boycott of Ruto’s forum, stating they had already made their demands clear.
Despite the withdrawal of the finance bill, protests have continued, with many demonstrators calling for the president to resign. However, turnout has decreased, and some activists have suggested rethinking their strategy after Tuesday’s demonstrations were marred by violence and looting. Activists blamed the violence on thugs hired by politicians to discredit the protest movement, while the government attributed it to opportunistic criminals.