Kenya to Cut 2024-25 Spending and Widen Fiscal Deficit Amid Protests and Economic Challenges

Kenya has announced plans to reduce its 2024-25 spending by 1.9% and widen its fiscal deficit to 3.6% of GDP. This decision follows the rollback of recent tax hikes in response to widespread protests.

Facing demands for his resignation and calls for reforms, President William Ruto has taken decisive action by dismissing nearly his entire cabinet and promising a more inclusive government.

To address the resulting $2.7 billion budget shortfall from the withdrawn tax increases, President Ruto has proposed a combination of spending cuts and additional borrowing.

Next week, lawmakers are set to debate the supplementary budget, which outlines a total spending of 3.87 trillion Kenyan shillings ($30 billion), a reduction from the previously planned 3.99 trillion shillings. The budget includes a 2.1% decrease in recurrent expenditure and a 16.4% reduction in development expenditure.

Despite retracting the tax hikes, the government has increased the road maintenance levy from 18 shillings to 25 shillings per litre of fuel.

President Ruto is under significant pressure from international lenders like the IMF to reduce deficits while simultaneously addressing the high cost of living affecting the Kenyan population. The IMF is currently assessing Kenya’s recent developments and will adjust its approach accordingly.

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