Kenya: Populism to austerity, Ruto’s struggle to balance the budget

Popular backlash against fiscal consolidation has thrown Kenya into turmoil. The government has withdrawn the budget proposals, but protesters are still calling for President Ruto’s resignation. Meanwhile, multilateral support, which has been critical in preventing a balance of payments crisis, was premised on a consolidation trajectory, which has not been put into question. In this research briefing we sketch the potential scenarios we could see playing out in Kenya, and what those mean for the economy and, more specifically, the fiscus.

What you will learn:

• Kenya has been facing a tumultuous month from an economic and political perspective, but our baseline scenario assumes that the East African nation is not headed towards a fiscal cliff.
• Less than a month ago, Mr Ruto withdrew the 2024 Finance Bill following unprecedented public outcry over high taxation and government corruption. The bill aimed to raise $2.7bn in taxes to reduce the country’s wide budget deficit and help cap borrowing.
• Mr Ruto rose to power in 2022 on a wave of populist support, promising to alleviate the economic hardships of the nation’s “hustlers.” However, his administration’s removal of subsidies on essential items, coupled with the introduction of new taxes, has led to widespread disillusionment.