Kenya to borrow funds, spend less after scrapping tax hikes

Kenya's President William Ruto speaks during a press conference at State House in Nairobi on July 04, 2024. [AFP]

Kenyan President William Ruto on Friday announced fresh borrowing plans and spending cuts after contentious tax hikes were scrapped following protests that left 39 people dead.

The East African nation was left reeling after peaceful rallies over the steep tax increases flared into violence with police firing at crowds who stormed parliament, leaving it partly ablaze.

While mostly led by Gen-Z Kenyans, the rallies tapped into a wider sense of anger against an annual finance bill, which Ruto was forced to abandon while warning of a massive funding shortfall.

"We will be proposing to the National Assembly a budget cut of not the entire 346, but a budget cut of 177 billion and borrowing the difference (around 169 billion shillings)," said Ruto.

Public debt amounts to some 10 trillion shillings ($78 billion), around 70 percent of Kenya's GDP.

The decision to borrow would result in the fiscal deficit rising "from 3.3 percent to 4.6 percent", but would pay for some services, Ruto said.

These would include the hiring of secondary school teachers and medical interns, as well as continuing to fund a milk stabilisation and fertiliser programme that protects farmers.

Ruto announced several belt-tightening measures including the absorption of 47 state-run organisations and companies with other departments.

The office of the first lady and that of the deputy president's spouse will cease to exist and the number of government advisors slashed by half.

Ruto announced the budget for government renovations -- a sore topic after it emerged earlier this year that the deputy president's office had spent some 10 million shillings on curtains -- would also be halved.

"All non-essential travel by state and public officers is hereby suspended," he added.

Anger has simmered over Ruto's extensive foreign travel, with the president jetting back to Kenya just before the first protests, following a high-profile trip to Washington.

"These measures will be followed by changes in government," he added, without giving more details.

The president was speaking shortly before he began hosting an event on X, formerly Twitter, where he had promised to engage with young Kenyans.