Kenya is set to reduce its government spending for the upcoming financial year by 12%, decreasing the budget to 3.7 trillion shillings ($28.35 billion). This announcement was made by President William Ruto, signaling a determined stride towards achieving a balanced budget within the next three years. The move is part of a broader strategy to stabilize the nation’s economy and ensure sustainable growth.
The decision to slash the budget comes in the wake of Kenya’s financial market performance, which saw a positive upturn following the issuance of a new $1.5 billion eurobond in February. This strategic financial maneuver was aimed at financing the partial repurchase of another bond maturing in June, a development that defied expectations of Kenya’s potential difficulties in accessing international markets. The successful bond issuance and the subsequent market response have provided a boost to both the Kenyan currency and stock shares, highlighting a growing confidence in the country’s economic management.
“We are reducing our budget from four point, almost 4.2 trillion (shillings) to 3.7 trillion,” President Ruto remarked during a state visit to Ghana. The reduction in the budget, according to Ruto, is a crucial step in ensuring the government “lives within its means” by “shedding off fat” from its expenditure.
The commitment to fiscal prudence was further underscored during a meeting with chief executives of state-owned companies, where President Ruto expressed his government’s goal to transition towards a balanced budget within a three-year timeframe. This shift marks a departure from Kenya’s previous fiscal approach, which involved running wide fiscal deficits to finance ambitious infrastructure projects over the past decade. While these investments have contributed to the country’s development, they have also raised concerns regarding the government’s debt repayment capacity amidst fluctuating market sentiments.
To address the budget deficit and stabilize public finances, the Ruto administration, which assumed office in 2022, has introduced a series of new tax measures. These measures, however, have sparked controversy, leading to discontent among certain segments of the population and business community. Some individuals and groups have even taken legal action to challenge the tax initiatives, highlighting the tension between the government’s fiscal policies and public sentiment.
