Kenya plans a 1.9% spending reduction for the 2024-25 fiscal year and will widen the fiscal deficit to 3.6% of GDP after tax increases were rolled back amid protests.
In response to calls for his resignation and reforms, President William Ruto dismissed most of his cabinet and pledged a more inclusive government.
To address a $2.7 billion budget shortfall from the withdrawn tax hikes, Ruto proposed spending cuts and increased borrowing.
Next week, lawmakers will debate a supplementary budget totaling 3.87 trillion Kenyan shillings ($30 billion), down from 3.99 trillion. Recurrent expenditure is set to decrease by 2.1%, and development expenditure by 16.4%.
Despite reversing the tax hikes, the road maintenance levy on fuel was raised to 25 shillings per litre from 18 shillings.
Ruto is under pressure from international lenders, including the IMF, to reduce deficits while managing high living costs for Kenya’s population. The IMF is evaluating Kenya’s recent developments and will adjust its approach accordingly.