Kenya Cuts Budget، Sees Wider Deficit After Deadly Protests

Kenya sees its budget gap widening to 3.6% of gross domestic product under a revised spending plan after deadly protests that left at least 41 people dead forced President William Ruto to back down on plans to raise $2.7 billion in new taxes.

Budget deficit

The East African nation، which had previously projected a budget deficit of 3.3% of GDP، also plans to cut its budget spending by nearly 2% to 3.87 trillion shillings ($29.9 billion) in the period through June 2025، Treasury principal secretary Chris Kiptoo said in a supplementary budget sent to lawmakers and posted on National Assembly website. Total revenue is seen declining to 17.5% of GDP from an earlier estimate of 18.5%.
Scrapping the levies “created a financing gap of a similar amount and implies that funding of expenditures to the tune of 344.3 billion shillings is not tenable،” according to the Treasury statement.

Kenya، at high risk of debt distress، had planned to tax items including sanitary pads and wheelchair tires as part of measures to slash fiscal deficit to 3.3% of GDP in the year that began July 1. The move had been backed by the International Monetary Fund.

The planned levies sparked off protests led mostly by Gen Z that have resulted in Ruto firing all but one of his ministers، while the nation’s police chief resigned on Friday. Moody’s on Monday downgraded Kenya’s rating one notch to Caa1، or seven notches into junk، in a sign of the country’s worsening fiscal plight.

Net foreign financing will amount to 2% of GDP with local borrowing at 1.6% of total output under the revised plan.

Capital expenditure

National government capital expenditure will be cut by 16.4%، while recurrent expenses will be slashed 2.1%، according to the estimates. The nation’s 47 counties will see their allocation increased nearly 3% to 410.95 billion shillings in the new proposals. Public debt service costs remain unchanged at 1.85 trillion shillings in the period through June 2025.

A lawmakers’ budget committee is expected to seek public views and report to the National Assembly before July 24 for approval، speaker Moses Wetang’ula said in a notice on Friday.

The $104-billion economy is bracing for more demonstrations next week as marchers call on Ruto to prosecute individual police officers who shot، maimed and abducted protesters. They also want Ruto to take decisive steps against corruption and end profligate spending.