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Ruto Announces Budget Cuts And Borrowing After Protests In Kenya

KENYAN President William Ruto announced on Friday a mix of spending cuts and additional borrowing to address a nearly $2.7bn budget shortfall. This financial gap resulted from the withdrawal of planned tax hikes amid nationwide protests.

Ruto’s decision to scrap the finance bill came in response to mass, youth-led demonstrations that have marked the most significant crisis of his two-year presidency. At least 39 people have been killed in clashes with police, and some protesters briefly stormed parliament last week.

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In a televised address, Ruto proposed spending cuts totalling KSh177bn ($1.39bn) for the fiscal year that began this month. He also indicated that the government would increase borrowing by about KSh169bn to bridge the budget gap.

Ruto faces the challenge of balancing the demands of lenders, such as the IMF, for deficit reduction with the needs of a population struggling with rising living costs. Analysts suggest that withdrawing the tax bill may cause Kenya to miss targets in its IMF programme, though the country does not have immediate debt payments requiring urgent funds.

Kenya’s budget deficit is now projected at 4.6 percent of gross domestic product for the 2024/25 financial year, up from an earlier estimate of 3.3 percent, according to Ruto.

The proposed austerity measures include dissolving 47 state corporations, halving the number of government advisers, suspending non-essential travel by public officials, and removing budget allocations for the president and deputy president’s spouses.

‘I believe these changes will set out our country on a trajectory towards economic transformation,’ Ruto stated.

He also announced a forensic audit of the country’s debt, which exceeds 70 percent of gross domestic product, and hinted at upcoming changes in the government.

Following his address, Ruto attempted to engage with young people via a live audio forum on X but encountered technical difficulties, with many users reporting issues joining the session.

Leading activists behind the protests had called for a boycott of Ruto’s forum, asserting that their demands were already clear. Despite the withdrawal of the finance bill, protests have persisted, with many demonstrators demanding Ruto’s resignation. However, turnout has declined, and some activists are reconsidering their strategy after recent demonstrations were marred by violence and looting.

Activists blame the violence on thugs hired by politicians to undermine the protest movement, while the government attributes it to opportunistic criminals.

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