President William Ruto of Kenya announced the withdrawal of a controversial tax legislation, succumbing to the public outcry after violent demonstrations erupted over the proposed new taxes intended to generate $2.3 billion. At least 23 people died as a result of the protests.
In a broadcasted speech on Wednesday, Ruto declared, “I concede and will not proceed with the Finance Bill, 2024. I am in charge of running a government, but I am also here to lead the people, and the people have clearly expressed their views.”
The proposed taxes were aimed at bolstering the nation’s finances and securing additional financing from the International Monetary Fund. On Tuesday, the bill was forcibly passed by members of Ruto’s coalition, albeit with modifications including the removal of a 16% tax on bread. Although these fiscal measures were initially welcomed by the markets, they sparked widespread protests fueled by soaring food prices and a youth unemployment rate estimated at 67% by the Federation of Kenya Employers.
After the bill’s passage, protesters overran police barriers and invaded the National Assembly. Ruto responded by labeling the protesters’ actions as treasonous and threatened to deploy the military to suppress further unrest. However, following interventions from his predecessor Uhuru Kenyatta and various civil society leaders, Ruto agreed to engage in dialogue with the protesters.
Ruto proposed to initiate discussions with the nation’s youth to address their concerns and identify their priorities within the next two weeks through a comprehensive engagement involving multiple stakeholders.
Despite his promises of government austerity, including reducing his own travel expenses and other governmental spending, public discontent may not be easily quelled.
Nic Cheeseman, a democracy professor at the University of Birmingham, remarked, “The intense public sentiment, visible both online and on the streets of Nairobi, has compelled the government to reconsider its stance.”
Under Ruto’s leadership, the Kenyan government has been tightening tax regulations and introducing reforms to reduce the country’s dependency on loans, in line with agreements made with the IMF in 2021.
The controversial Finance Bill aimed to collect an additional 302 billion shillings ($2.3 billion) to help cover a budget deficit amounting to 3.3% of the GDP. The IMF, which provides assistance to countries struggling with payment imbalances, typically advocates for austerity as a necessary sacrifice for long-term economic stability, though it has not commented on the recent protests.
Simon Quijano-Evans, chief economist at Gemcorp Capital Management, noted that the reactions to the tax law highlight the significant challenges faced by the young populations in African countries. He emphasized the urgent need for access to more affordable global capital for Sub-Saharan Africa.
Following Ruto’s announcement, Kenya’s financial markets saw a slight recovery, with the nation’s 2031 dollar bonds improving slightly, closing with a yield of 10.67% at the end of the day in Nairobi.
