On Monday, during an event in Kenya’s capital city, the Treasury Secretary John Mbadi, revealed that the National Treasury predicts a budget deficit of 767 billion shillings ($5.95 billion) for the year through June 2025, as reported by Bloomberg.
The unpopular tax proposals, which would have potentially brought in approximately $2.7 billion in revenue for Kenya, were withdrawn by President William Ruto in response to fierce anti-government riots that claimed many lives.
The tax was imposed on basic amenities, products that contribute to e-waste and harm to the environment, imported products, and products and services used directly and exclusively in the building.
Bloomberg’s report disclosed that for Kenya to mitigate it financial vulnerabilities, its government had been pressured to agree to a $3.6 billion finance package with the International Monetary Fund in 2021. Since then, the government has been under pressure to increase tax collection and reduce borrowing.
The government had introduced numerous modifications to its budget-deficit estimate. The Treasury initially projected a deficit drop of 3.3% of the country’s GDP. After that, it made several changes until eventually increasing the estimate to 4.3% of GDP on Monday.
“The government is operating under a constrained fiscal environment,” said Mbadi.“We are barely managing the 2024-25 budget,” he added.
Mbadi explained that there is pressure on Kenya’s limited resources due to inadequate performance in tax collection, mounting debt and loan repayments, and outstanding bills and spending carryovers from the previous fiscal year.
