Kenyan President William Ruto, in a desperate attempt to salvage his crumbling administration, announced drastic spending cuts and additional borrowing to plug a gaping $2.7 billion budget hole. This crisis emerged after he caved to nationwide protests and withdrew his ill-fated tax hikes.
Why It Matters
Ruto’s finance bill, loaded with tax increases, was the spark that ignited a firestorm of mass protests, predominantly led by disenchanted youth. This upheaval has escalated into the most significant crisis of his two-year presidency, leaving at least 39 people dead in violent clashes with police. The situation even saw demonstrators storming parliament.
In a televised address, Ruto laid out his plan: he will ask parliament for spending cuts amounting to 177 billion shillings ($1.39 billion) for the current fiscal year and increase borrowing by about 169 billion shillings. He’s stuck between a rock and a hard place, with international lenders like the IMF demanding deficit reductions, while Kenyans buckle under the pressure of soaring living costs.
Economic analysts have pointed out that withdrawing the finance bill might cause Kenya to miss its IMF program targets. Yet, the government isn’t facing any imminent debt repayments. Ruto’s decision has pushed Kenya’s budget deficit projection to 4.6% of GDP for the 2024/25 financial year, a jump from the previous estimate of 3.3%.
To enforce austerity, Ruto plans to dissolve 47 state corporations, slash the number of government advisers by 50%, suspend non-essential travel for public officials, and eliminate budget allocations for the spouses of the president and deputy president.
What They Are saying
“I believe these changes will set our country on a path towards economic transformation,” Ruto asserted, with a hopeful tone that many found unconvincing.
Adding to the mix, Ruto announced a forensic audit of Kenya’s staggering debt, now over 70% of GDP, and hinted at upcoming government changes. However, his attempt to engage with young people through a live audio forum on X faced technical glitches, leaving many unable to join.
Activists, who spearheaded the protests, dismissed Ruto’s forum as irrelevant, urging a boycott. They insisted their demands had already been clearly communicated. Despite Ruto scrapping the finance bill, protests persist, with calls for his resignation growing louder.
However, turnout has dwindled, and Tuesday’s demonstrations descended into violence and looting, prompting some activists to reconsider their strategy.
Bottom Line
Kenya finds itself at a crossroads, grappling with economic turmoil and a leadership crisis. Whether Ruto’s proposed measures will stabilize the situation or further inflame public discontent remains to be seen.
