Hornet’s nest

Kenya’s government plans to reinstate some tax measures scrapped after deadly protests in June, Finance Minister John Mbadi said on TV…

Kenya’s government plans to reinstate some tax measures scrapped after deadly protests in June, Finance Minister John Mbadi said on TV Sunday night. While some measures will be tweaked, they are needed to fund expenditures like teachers’ wages, raising the risk of further unrest as youth-led protest groups threaten to return to the streets. Also, Kenya’s Supreme Court has temporarily suspended the Court of Appeal’s ruling that declared the 2023 finance law unconstitutional, aiming to maintain budget stability until the government’s appeal is heard next month. Hearings on the law’s constitutionality are scheduled for 10 and 11 September.

The initially abandoned tax bill, developed to raise revenues and reduce borrowing, was included in the Finance Bill 2024 and aimed to generate an additional 344 billion shillings ($2.7 billion) in the current fiscal year. The plan was abandoned following anti-government demonstrations in which police killed 61 people. Responding to the protesters, President William Ruto withdrew the bill and fired his cabinet, which has since been reconstituted with national unity in mind. However, Kenya’s fiscal problems run deep. The government has implemented several controversial measures, including a housing tax, doubling the value-added tax on fuel, and increasing the top income tax bracket to 35%. These moves aim to boost tax revenue and reduce borrowing, in line with the conditions of a $3.6 billion funding package agreed upon with the International Monetary Fund. This package seeks to address Kenya’s debt vulnerabilities, which are considered high-risk due to the country’s debt-to-GDP ratio of approximately 70%. Including opposition figures in Mr Ruto’s cabinet could be seen as an attempt to avoid political accountability while persisting with ineffective practices. The protesters’ indication of returning to the streets reflects the youth’s long-standing disengagement from the political scene. Political party affiliation has significantly declined over the past two decades, dropping from nearly 70% to about 50%. This trend is particularly notable among young people aged 35 and under, who are increasingly disengaging from formal politics. The proportion of young Kenyans without a political party affiliation has surged from approximately 30% to over 50%. This disaffection is also evident in reduced electoral participation, as seen in the notable drop in youth voter registration and turnout during the 2022 election. The exodus of young Kenyans from mainstream politics, driven by justified disillusionment with a stagnant political elite, threatens political stability and economic growth in Kenya and other African countries. With Kenya’s judiciary perceived as aligning with the political class in the fiscal crisis, there is a risk that other involved institutions could also lose their legitimacy.