Kenya Faces Budget Crisis Amid Proposed Spending Cuts and Increased Borrowing

Kenya's finance minister reinforced the government's commitment to spending cuts after President William Ruto withdrew a tax hike proposal, creating a $2.7 billion budget gap. Ruto indicated that the shortfall would be filled through additional borrowing, increasing the fiscal year's total debt to nearly 1 trillion shillings.

Kenya's finance minister on Monday reaffirmed the government's commitment to cutting spending after the president suggested a nearly $2.7 billion budget gap caused by the withdrawal of proposed tax hikes would be funded by borrowing.

Last Wednesday, President William Ruto withdrew a finance bill containing 346 billion Kenyan shillings ($2.69 billion) in tax increases following deadly protests in which at least 24 people were killed. In his speech announcing the bill's withdrawal, Ruto said he would propose austerity measures to help tackle the fiscal deficit.

However, in an interview with television stations on Sunday, Ruto said the government would have to borrow an extra 346 billion shillings to fill the deficit, bringing total borrowing for the 2024/25 fiscal year to nearly 1 trillion shillings. "The funding gap we have done with the finance bill going down is that instead of borrowing 600 billion, we are going to borrow 600 billion plus 346 billion. That is close to a trillion," Ruto said in the interview.

Asked about the government's plans, Finance Minister Njuguna Ndung'u noted that there are legal limits on borrowing and the carrying capacity of debt. "So it means that we must have expenditure cuts. This will be known once Parliament approves Supplementary one (budget)," he told Reuters in a text message.

Kenya's national debt of more than 70% of gross domestic product already surpasses the statutory limit of 55% of GDP. After withdrawing the bill, Ruto asked lawmakers to pass a supplementary budget, but parliament is currently in recess. ($1 = 128.5000 Kenyan shillings)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)