Two years into President William Ruto’s term, Kenya’s economic landscape remains fraught with challenges, and the administration’s attempts to address these issues have been met with resistance from both opposition leaders and the public. The economy, which Ruto promised to stabilize through his “economic rebound” plan, has instead continued to struggle with rising public debt, growing fiscal deficits, and a public discontented with increasing taxation.
Escalating Public Debt and Widening Deficit
When President Ruto assumed office in September 2022, he inherited an economy grappling with “empty coffers.” His administration faced the daunting task of reversing a growing fiscal deficit, which had already widened from 6.3% of GDP in 2022 to 7% in 2023. This widening deficit was largely driven by underperforming revenues and rising interest costs, forcing the government to rely on further borrowing to finance its expenditures.
Kenya’s public debt has been on an upward trajectory, exacerbated by exchange rate depreciation and an increased appetite for foreign loans. In December 2022, Kenya’s public debt stood at Ksh9.1 trillion, a 5% rise from the Ksh8.7 trillion reported by the Central Bank when Ruto first took office. By January 2024, the debt had swelled to Ksh11.2 trillion, representing 69.7% of GDP.
The growing debt load has attracted international scrutiny. While the International Monetary Fund (IMF) deemed Kenya’s debt as sustainable, it also cautioned that the country faced a high risk of debt distress. This raised concerns about Kenya’s ability to service its obligations while maintaining fiscal discipline.
The Government’s Mitigation Efforts
In response to the worsening debt situation, President Ruto outlined a series of measures aimed at curbing the government’s borrowing appetite and increasing revenue. These included plans to cut public spending, limit borrowing, and enhance tax collection. However, these measures have faced significant hurdles. The government’s spending cuts have been largely symbolic, and attempts to impose new taxes have sparked widespread protests.
In 2023, the government introduced the Finance Bill as part of its strategy to fund the budget for the 2023-2024 financial year. The bill included several contentious tax proposals that sparked fierce opposition from the Azimio La Umoja coalition, led by opposition leader Raila Odinga. The coalition took to the streets in a series of protests demanding the bill’s withdrawal, but President Ruto remained defiant, eventually signing it into law.
The Finance Bill of 2024 followed a similar trajectory, with the government once again proposing new taxes aimed at financing the 2024-2025 financial year budget. Despite a public participation process where various stakeholders voiced their opposition to the proposed taxes, lawmakers passed the bill. This move triggered even larger protests, with youth-led demonstrations gaining momentum across the country.
Public Resistance and the Gen-Z Protests
The public’s frustration with the government’s tax policies reached a boiling point with the passing of the Finance Bill 2024. Young Kenyans, many of whom were facing the brunt of economic hardships, took to the streets in protest. The nationwide demonstrations culminated in a dramatic moment when a group of Gen-Z protesters stormed Parliament, attempting to evict lawmakers who had just passed the controversial bill.
The protest was symbolic of the growing disconnect between the government and the country’s youth, many of whom feel disenfranchised by economic policies that have left them facing rising unemployment and a high cost of living. The government’s decision to move forward with the Finance Bill, despite overwhelming public opposition, has only fueled further anger, leaving many questioning the administration’s priorities.
A Mixed Economic Outlook
Despite the economic challenges, Kenya’s economy managed to grow by 5.2% in 2023, up from 4.8% in 2022. While this growth provided a glimmer of hope, it did little to alleviate the public’s frustrations, especially given the persistent fiscal pressures and rising debt levels. The government’s decision to focus on increasing taxes as a solution to its fiscal challenges has been met with skepticism, and the ongoing protests have underscored the deepening divide between the administration and its citizens.
As President Ruto enters the third year of his term, the challenges remain formidable. With a public increasingly vocal in its dissatisfaction and an economy weighed down by debt, the road ahead will require a delicate balancing act to restore both public trust and fiscal stability.
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