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Ruto Proposes Spending Cuts and Borrowing to Address Budget Deficit

NAIROBI — President William Ruto announced on Friday a plan to address Kenya’s nearly $2.7 billion budget shortfall through a combination of spending cuts and increased borrowing. The decision follows the withdrawal of planned tax hikes, which had triggered widespread protests across the nation.

The protests, led primarily by youth groups, have marked the most significant challenge to Ruto’s presidency since he took office two years ago. In the past week, clashes between demonstrators and police have resulted in at least 39 deaths and saw some protesters briefly storm the parliament.

In a televised address, Ruto detailed his plan to parliament, which includes reducing government spending by 177 billion shillings ($1.39 billion) for the current fiscal year and increasing borrowing by approximately 169 billion shillings. This dual approach aims to balance the demands of international lenders, such as the International Monetary Fund (IMF), with the needs of a population burdened by rising living costs.

Analysts warn that the withdrawal of the tax bill may cause Kenya to miss its IMF program targets. However, the government reassured that there are no imminent debt obligations requiring immediate funds.

Ruto’s proposal increases the projected budget deficit to 4.6% of the gross domestic product (GDP) for the 2024/25 financial year, up from the previously estimated 3.3%.

The president outlined several austerity measures, including the dissolution of 47 state corporations, a 50% reduction in the number of government advisers, a suspension of non-essential travel by public officials, and the elimination of budget allocations for the spouses of the president and deputy president.

These moves are seen as critical steps to stabilize the country’s finances while navigating the socio-economic challenges posed by the recent protests and the broader economic climate.

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