Why Kenya is on fire

Under the pressure of this situation, President William Ruto was forced to take drastic measures. He has withdrawn the controversial bill and sacked almost his entire cabinet. The youth-led demonstrations (see Alba Nakuwa and Shakira Wafula in this issue) continue. There have already been more than 40 deaths. Hundreds have been injured. Human-rights organisations are also reporting abductions.
The fact that it has come to this should be no surprise to anyone. Ruto won the elections in August 2022 and found a country in debt crisis. The foreign debt amounted to $ 62 billion or 67 % of Kenya’s gross domestic product (GDP).

Former President Uhuru Kenyatta took on extensive loans domestically, from commercial lenders, China, the USA, Saudi Arabia, the World Bank and the IMF. This was used to finance huge infrastructure projects such as the Standard Gauge Railway (SGR), which connects Nairobi with the port city of Mombasa, and an additional 11,000 kilometres of paved roads.

The commercial loans came with high interest rates and the infrastructure did not generate the expected revenue to finance these loans. In 2021, Kenyatta entered into a 38-month debt-relief agreement with the IMF to help Kenya manage its debt. This was on the condition that taxes would be increased, subsidies reduced and government spending cut. Currently, more than half of government revenue is being used to repay the debt.

This is at the expense of development projects, the education system or healthcare. As recently as March, a good half of all Kenyan doctors went on strike, paralysing the healthcare system, schools opened late after the vacations due to a lack of budget, and the country’s infrastructure could no longer cope with the heavy flooding of the last rainy season. Hundreds of people died in the floods.

Axe the tax

The financial bill that broke the camel’s back is a guideline that sets out the government’s budget plans and is usually presented to parliament before the start of a financial year. In the 2024/25 version, the Kenyan government wanted to raise $ 2.7 billion in additional taxes to reduce the budget deficit and borrowing. Kenya’s national debt now stands at 68 % of GDP.

New levies were introduced on financial transactions and basic foodstuffs such as bread, vegetable oil and sugar. A new vehicle-registration tax of 2.5 % of the value of a car and an “eco-levy” imposed on previously exempt goods such as sanitary towels and diapers caused public outrage. It goes without saying that this did not go down well in a country where masses of people have been living in poverty for decades.

Citizens were further angered by the millions lost through rampant corruption and waste of public funds that could significantly reduce the national debt if properly managed. Many leading politicians were accused of flaunting an opulent lifestyle on the internet based on questionable wealth suddenly acquired within two years in office.

Much anger is directed against the IMF, since protesters know that the government is basically implementing the conditions attached to its emergency loan. But the situation is more complicated than in earlier African debt crises. Kenya owes huge sums to Chinese institutions as well as private-sector bond holders.

Ruto at crossroads

Ruto is now at a crossroads: he says his government will have to borrow more money, $ 7.6 billion, to run the government after the rejection of the controversial finance bill, and that this will set the country back by two years.

In light of calls for his resignation, Ruto is putting on a brave face after making major concessions to the demands of the youth. He faces the difficult task of appointing an entirely new cabinet. However, public confidence in him has been severely damaged.

It is unlikely that Ruto will resign. The protesters have promised to continue demonstrating.

Isaac Sagala is a journalist and radio trainer. He lives in Nairobi, Kenya.
bwanasagala@gmail.com