2024-08-08 22:54:33
Kenya has been forced to withdraw its 2024-2025 budget draft due to domestic protests, and the Court of Appeal has just declared the 2023 Public Finance Act “unconstitutional.” The Kenyan government is already heavily in debt and is running out of money.
In her ruling, the Court of Appeal noted irregularities in parliamentary procedure. She declared: Unconstitutional » The decision on the 2023 Public Finance Law came as a surprise to the authorities, although they still have recourse to the Supreme Court. This is a real blow to the president. Justice XN Iraki is an economist and professor at the University of Nairobi. Already, with The repealed Finance Act 2024the government hopes to reduce borrowing by increasing taxes. From now on, without new taxes and without being able to count on taxes in 2023, the government will have even less revenue than planned. The authorities will either have to borrow more or spend less. It has already begun, and the budgets of several development projects have been reduced. »
Meeting with the International Monetary Fund at the end of the month
The president announced on Monday cuts to several budgets: administration, justice, health and transport. The country is short of money and must deal with a heavy debt burden. It accounts for 70% of Kenya’s GDP. The authorities must bring all creditors to the negotiating table and have an honest dialogue with them to understand the seriousness of the situation. said Jason Braganza, executive director of AFRODAD, a civil society organization specializing in African debt issues. We must negotiate to reschedule deadlines for this year, next year, or even 2026. We must also find solutions to protect state revenues. Currently in Kenya, 68 to 70 percent of government revenues go to debt repayments. This is a big problem because it leaves little money for government spending, so borrowing is needed to implement development projects. »
Uncertainty in business
International Monetary Fund (IMF) Kenya’s economic plan must be studied at the end of the month. This is a much-anticipated consultation as it should allow the validation of the next tranche of aid to the country. At the same time, the government’s budget difficulties could have an impact on the business community. ” In this case, Jason Braganza stressed that This will be destabilizing and create a lot of uncertainty for local businesses, who will not know whether they will be able to obtain financing or what the impact will be on their operating costs. »
However, borrowers breathed a sigh of relief this week when the Central Bank of Kenya announced it would cut its key interest rate to 12.75% from 13%, a decision prompted by a slowing economy. inflation and the stability of the Kenyan shilling.
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