Kenyan President Ruto Announces Sweeping Spending Cuts, Plan to Borrow $1.3bn to Compensate for Tax Bill

In a desperate move to address economic turmoil and nationwide protests, Kenyan President William Ruto announced on Friday a significant reduction in government spending, amounting to 177 billion shillings ($1.39 billion) for the fiscal year starting in July.

This decision follows weeks of intense protests that forced the government to abandon planned tax hikes, which had sparked widespread unrest.

The government, facing a substantial budget shortfall due to the withdrawal of the controversial finance bill, will also increase borrowing by approximately 169 billion shillings ($1.3bn) to bridge the 346 billion shilling gap. This fiscal adjustment has pushed the projected budget deficit for the 2024/25 financial year to 4.6% of GDP, up from an earlier estimate of 3.3%.

The Protests and Their Impact

The protests, initially peaceful, escalated into violent confrontations, becoming the most significant challenge to Ruto’s presidency, which is now in its second year. Human rights groups have reported hundreds of arrests and at least 39 deaths related to the government’s severe crackdown on demonstrators, sparking concerns about a potential regression in civil liberties.

The nationwide protests were ignited by Ruto’s proposal to introduce new tax hikes, which many Kenyans saw as an additional burden amid already challenging economic conditions. The protests were largely driven by the younger generation, particularly Gen-Z activists, who took to the streets demanding economic justice and accountability from the government. Their actions were characterized by their use of social media to organize and amplify their message, making it difficult for the government to ignore their demands.

The protests quickly gained momentum, with demonstrators voicing their frustrations over high living costs, unemployment, and perceived government corruption. Despite the peaceful intentions of many protestors, the demonstrations turned violent as police clashed with crowds, leading to numerous injuries and fatalities. The government’s heavy-handed response, including the use of tear gas and live ammunition, drew widespread condemnation both domestically and internationally.

Measures to Cut Spending

In a televised address to the nation, Ruto outlined several drastic measures aimed at reducing government expenditure. There are the following:

1. Dissolution of State Corporations: The government will dissolve 47 state corporations as part of its efforts to streamline operations and reduce costs.
2. Reduction of Government Advisors: The number of advisors in the government will be halved immediately.
3. Suspension of Non-Essential Travel: All non-essential travel for public office bearers will be suspended.
4. Elimination of Certain Budget Lines: Funding for the operations of the Office of the First Lady, the spouse of the Deputy President, and the Prime Cabinet Secretary will be removed.
5. Mandatory Retirement for Public Servants: Public servants who have reached the retirement age of 60 will be required to retire immediately.

President Ruto also announced plans for a forensic audit of the country’s debt, indicating a commitment to transparency and accountability in managing Kenya’s financial obligations. He hinted at upcoming changes in the government structure, promising further announcements soon.

A Precedent for Other African Countries

The developments in Kenya set a significant precedent for other African countries facing similar economic challenges amid lavish government spending. In Nigeria, for instance, the government has been criticized for its extravagant budget that benefits political elites while the general population struggles with high inflation and unemployment. Nigerian President Bola Tinubu’s administration has faced similar calls for fiscal prudence, especially given the country’s dwindling oil revenues and heavy reliance on borrowed funds.

Analysts believe the success of Kenya’s Gen-Z-led protests in forcing the government to rethink its economic policies may inspire similar movements across the continent, warning that governments with similar challenges should address them urgently.