Kenya’s President William Ruto announced that the country will have to borrow more money to keep the government running after a controversial finance bill, which proposed significant tax hikes, was rejected following widespread protests.
The bill, aimed at raising more revenue, faced fierce opposition leading to deadly demonstrations and the arson of the parliament building.
President Ruto, speaking on Sunday, emphasized the setback caused by dropping the bill, stating it had delayed the country’s financial plans by two years.
“It is easy for us, as a country, to say: ‘Let us reject the finance bill.’ That is fine. And I have graciously said we will drop the finance bill, but it will have huge consequences,” Ruto explained.
He detailed the challenge of managing the national debt while being unable to raise additional taxes. Consequently, Kenya will need to borrow one trillion shillings ($7.6 billion) to sustain government operations, marking a 67% increase from the initial borrowing plan.
To address the financial gap, Ruto mentioned potential spending cuts across the government, including his office and reductions in allocations to the judiciary and county governments.
“I have been working very hard to pull Kenya out of a debt trap,” he said. “Dropping the finance bill means we will have to borrow more, and this has significant implications.”
Ruto highlighted the protesters’ concerns about potential wastage of the additional tax revenue. The proposed taxes were expected to generate approximately 350 billion Kenyan shillings, while borrowing was anticipated to cover an additional 600 billion shillings.
The president outlined the country’s debt burden, with over $80 billion in debt and 60% of collected revenues dedicated to debt servicing. He stressed his efforts to pull Kenya out of a debt trap, acknowledging the public’s rejection of the finance bill but warning of significant consequences.
Ruto indicated that the rejection of the bill would impact the employment of 46,000 junior secondary school teachers on temporary contracts and healthcare provision.
“The rejection of the budget will affect the employment of teachers and our ability to provide adequate healthcare,” he noted.
Furthermore, the government would struggle to support dairy, sugarcane, and coffee farmers, including settling debts owed by their factories and cooperative societies.
Addressing the concerns of those opposed to the finance bill, Ruto suggested potential spending cuts by his office and scrapping budgets for the First Lady and the deputy president’s spouse. However, his remarks on further borrowing faced criticism. Economist Odhiambo Ramogi argued that additional borrowing would exacerbate Kenya’s debt distress. “It is not necessary or prudent to borrow more, as this would put Kenya in a greater position for debt distress,” Ramogi stated. He also questioned the president’s commitment to reducing spending, given he had recently signed spending plans into law.
Despite the bill’s withdrawal, anger against the government persists, with more protests planned. Demonstrators are demanding greater accountability and calling for the president’s resignation, accusing the government of insensitivity and the police of excessive brutality during protests. According to a doctors’ association, at least 23 people were killed and many others wounded during the recent unrest.
President Ruto defended the police’s actions, stating they had done their best under the circumstances and assuring that any excesses would be addressed through established mechanisms.
