Kenya Slashes Tax Targets, Increases Borrowing Amid Economic Turmoil and Gen Z Protests
Nairobi, The Gulf Observer: The Kenyan government has revised its financial roadmap for the current fiscal year, opting to reduce its tax collection target and significantly ramp up borrowing, Treasury Cabinet Secretary John Mbadi revealed through a newly issued gazette notice.
The Treasury now aims to collect Ksh2.4 trillion ($18.5 billion) in revenue for the year ending June—a three percent cut from the earlier revised target of Ksh2.475 trillion. The downward revision follows months of unrest triggered by the 2024 Finance Bill, which sparked widespread Gen Z-led protests. The demonstrations, initially opposing proposed taxes on essential items like bread and diapers, escalated into a broader anti-government movement.
“This economy was shut for two months. That affected revenue collection,” Mbadi told lawmakers this week.
The protests reportedly led to at least 60 casualties and numerous alleged abductions, intensifying pressure on the Ruto administration to drop its controversial fiscal plans.
In response to the revenue shortfall, domestic borrowing projections have jumped by 46%, reaching Ksh597.2 billion, while foreign borrowing is now expected to hit Ksh718.4 billion—a 20% increase from the prior estimate of Ksh598.6 billion.
However, the revised financial direction comes with significant risks. A recent report by the International Monetary Fund (IMF) placed Kenya at a high risk of debt distress, raising concerns about the country’s ability to meet its growing debt obligations.
Notably, Kenya opted out of the final review of a four-year $3.6 billion IMF program, forfeiting approximately $850 million in available funding. Instead, the government plans to negotiate a new three-year deal with the IMF, expected to conclude by November.
Prime Cabinet Secretary Musalia Mudavadi defended the move, stating that the previous IMF targets were “extremely steep” and placed undue pressure on the economy. “If you are unrealistic with some of your projections, you end up exerting a lot of pressure on your economy and your people,” he said.
Mudavadi assured that the new agreement would reflect Kenya’s economic realities, considering both local constraints and the global financial climate. “We would have to be very realistic based on the numbers that we have as a country to be able to project and show the kind of revenue targets that we want to work with going forward,” he added.
As Kenya navigates these fiscal adjustments, questions remain about how well the new borrowing strategy will align with President William Ruto’s development agenda, especially amid persistent geopolitical uncertainties and global trade tensions, including the lingering effects of U.S. trade tariffs introduced during Donald Trump’s presidency.
The months ahead will prove critical in determining whether the government can stabilize the economy while maintaining public confidence and international financial credibility.
