Kenya’s government plans to reduce its 2024-25 spending by 1.9% and widen the fiscal deficit to 3.6% of GDP in a revised budget, according to the treasury. This decision comes weeks after the government was compelled to reverse tax hikes following widespread protests.
President William Ruto, in response to the escalating public discontent, recently dismissed nearly his entire cabinet and vowed to form a more inclusive government. The protests, which started last month against the now-retracted tax increases, have evolved to demand Ruto’s resignation and significant political reforms to address corruption and poor governance.
Earlier this month, Ruto suggested a combination of spending cuts and increased borrowing to address the nearly $2.7 billion budget shortfall caused by the abandoned tax hikes. When lawmakers reconvene next week, they will need to debate and approve the supplementary budget, which was signed by Principal Treasury Secretary Chris Kiptoo on July 11 and posted on the parliament’s website.
The supplementary budget estimates total spending at 3.87 trillion Kenyan shillings ($30 billion), down from 3.99 trillion shillings ($31 billion). Recurrent expenditure is projected to decrease by 2.1%, while development expenditure will see a significant drop of 16.4%.
Despite the retraction of the tax-hike legislation, the energy regulator on Monday increased the road maintenance levy to 25 shillings per litre of fuel, up from 18 shillings.
Facing the most severe crisis of his two-year presidency, Ruto is navigating between the demands of international lenders like the International Monetary Fund (IMF) to reduce deficits and a population grappling with high living costs. The IMF announced on Thursday that it is evaluating recent developments in Kenya and adjusting to the evolving situation.