Kenya plans to reduce its spending for the 2024-25 fiscal year by 1.9% and increase the fiscal deficit to 3.6% of GDP, following the reversal of tax increases in response to protests.
In response to calls for his resignation and reforms, President William Ruto dismissed nearly his entire cabinet and pledged to form a more inclusive government.
To address a $2.7 billion budget shortfall caused by the rescinded tax hikes, Ruto proposed spending cuts and additional borrowing.
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Next week, lawmakers will discuss the supplementary budget, which outlines total spending of 3.87 trillion Kenyan shillings ($30 billion), down from 3.99 trillion. Recurrent expenditure is expected to decrease by 2.1% and development expenditure by 16.4%.
Despite the rollback of tax hikes, the road maintenance levy on fuel was raised to 25 shillings per litre from 18 shillings.
Ruto is under pressure from international lenders such as the IMF to reduce deficits while managing a population grappling with high living costs. The IMF is evaluating Kenya’s recent developments and will adjust its approach accordingly.
