President of Kenya Cautioning of Significant Consequences Following Unsuccessful $80 Billion Debt Relief Endeavor

Kenya’s debt may increase due to recent protests leading to the rejection of a finance bill by President William Ruto. Ruto plans to halve a $2.7 billion budget deficit and borrow the remainder, yet the funding source remains unspecified. Currently, public debt accounts for approximately 70% of Kenya’s GDP, the highest in two decades.

The crucial issue lies in how the government will repay debts without upsetting Kenyans or stalling the economy. Economist Mbui Wagacha proposes establishing a professional budget and management entity akin to the U.S.’s Office of Management and Budget. Presently, the treasury estimates budgets and submits them to the parliamentary finance committee for bill creation.

Economist Ken Gichinga asserts that increased government borrowing will hinder Kenya’s economic growth, particularly as businesses struggle post-COVID and amid the Ukraine conflict. He advocates for simplifying access to low-interest credit for vital sectors like tourism and agriculture, emphasizing the role of small businesses in Kenya’s economic development.

The IMF, implicated in some contentious tax adjustments, has faced public discontent in Kenya. In a recent statement, the IMF expressed commitment to monitoring Kenya’s situation, aiming to aid the country in overcoming economic challenges, enhancing economic prospects, and improving the well-being of its populace.