On Kenya’s planned spending cuts after tax-hike rollback

By Agencies

Kenya’s government plans to cut 2024-25 spending by 1.9% and widen the fiscal deficit to 3.6% of GDP in a revised budget, the treasury said, weeks after it was forced to roll back tax hikes due to mass protests.

President William Ruto last week fired almost his entire cabinet and pledged to set up a broad-based government in his latest concession to demands from protesters.

Public demonstrations began last month against the now-binned tax hikes, but went on to demand Ruto’s resignation and deep-rooted political changes to tackle corruption and poor governance.

Ruto had earlier this month proposed spending cuts and additional borrowing in roughly equal measure to fill the nearly $2.7 billion budget hole caused by the withdrawal of the tax hikes.

When lawmakers return to parliament next week they will need to debate and pass the supplementary budget, which was signed by Chris Kiptoo, principal treasury secretary on July 11, and shared on parliament’s website.

The supplementary budget projects total spending at 3.87 trillion Kenyan shillings ($30 billion), down from 3.99 trillion shillings ($31 billion), Kiptoo said.

Recurrent expenditure is estimated to fall 2.1%, while development expenditure will drop 16.4%, he said.

Despite the withdrawal of the tax-hike legislation, the energy regulator on Monday raised the road maintenance levy to 25 shillings per litre of fuel, up from 18 shillings.

Facing the worst crisis of his two-year presidency, Ruto has been caught between the demands of lenders such as the International Monetary Fund (IMF) to cut deficits, and a population struggling with the high cost of living.

The IMF said on Thursday it was assessing recent developments in Kenya and making adjustments to evolving circumstances.

Source: Reuters