Kenya’s finance ministry, after being forced into a humiliating retreat on its controversial financing law, is now rushing for public suggestions to salvage the mess. Finance Minister John Mbadi, appointed last month from the opposition (as if that would solve anything), has resorted to asking ordinary Kenyans how to fix the economy.
This comes after the government, led by President William Ruto, had to scrap tax hikes worth over 346 billion shillings ($2.7 billion) in June, following nationwide protests that left more than 50 dead. The backlash from the tax plan? A ballooning budget deficit, unpaid bills piling up, and a nervous IMF tapping its fingers waiting for Kenya to get its act together.
What They Are saying
“We are barely managing. This is not where we wanted to be, but we are here,” Mbadi stated at a budget meeting, probably trying to downplay the gravity of the crisis. He was brought in from the opposition, possibly as a desperate attempt by Ruto to stabilize a crumbling government. Initially, Mbadi suggested he would revive some of the very tax hikes that sparked the protests, because why not make things worse, right? But after a predictable public outcry and threats of more chaos, he backed down.
Now, in a move that blatantly signals “we don’t have a plan,” Mbadi will send out a circular asking the public for their brilliant ideas to fix the economy. Kenyans have until September 20 to share their thoughts. In case anyone forgot, this is the same government that ignored public sentiment before pushing for tax hikes, only to be met with violent protests. But now they want opinions?
Why It Matters
Kenya’s debt situation is no joke. Years of borrowing, largely for massive infrastructure projects, has left the country’s debt at levels beyond what the World Bank and IMF recommend. Yet Mbadi insists, “We have no two ways about it. There is no debt restructuring in this country. We will not accept it. We will not do it. We will manage our debts and pay and remain afloat.” Bold words, but one wonders how Kenya plans to “stay afloat” with this sinking ship of an economy.
Bottom Line
Mbadi hinted at possible tax cuts once the situation improves. Among these potential cuts? Lowering VAT from 16% to 14% and reducing corporate income tax by 5%. Of course, that’s only after Kenya climbs out of its financial black hole.
