Kenya's President Ruto scraps $2.3bn tax plan after deadly protests

Kenyan President William Ruto said he was withdrawing a contentious tax Bill, bowing to public pressure after deadly protests against the plan to raise $2.3-billion in new levies led to the deaths of at least 23 people.

“I concede, and therefore I will not sign this Finance Bill, 2024,” Ruto said in a televised address on Wednesday. “I run a government but I also lead people. And the people have spoken.” 

Ruto proposed the new taxes to improve state finances and access more International Monetary Fund financing. On Tuesday, legislators in his ruling coalition pushed through the Bill — after dropping some of the more contentious levies such as a 16% tax on bread. While the fiscal reform plans cheered markets, they triggered protests by residents struggling with rising food prices and a youth unemployment rate that the Federation of Kenya Employers puts at as high as 67%. 

Protesters broke through police barricades and stormed the National Assembly in Nairobi just after legislators approved the legislation. Ruto, in a defiant speech hours later, termed the action treasonous and said he would deploy the military to quell further violence. His reversal comes after his predecessor Uhuru Kenyatta and civil society leaders asked him to talk to protesters.  

Most of the protesters are young Kenyans in their 20s and 30s who had been mobilising on social media platforms. While past anti-government marches were mostly organised by opposition politicians, the current rallies seemed to be organic and largely peaceful — but they were met by police firing live rounds, tear gas and powerful water cannons.

“I propose an engagement with young people of our nation to listen to their issues and agree with them on their priority areas of concern,” said Ruto. “I also propose that within the next 14 days, a multisectoral, multistakeholder engagement be held with a view to charting the way forward.”

While he also promised austerity measures, including a leaner travel budget for himself, and smaller allocations for hospitality, vehicle purchases and renovations, the commitment may fail to pacify the masses.

“My sense is that the depth of public feeling, expressed on social media and the streets of Nairobi has forced the government to think again,” said Nic Cheeseman, a professor of democracy at the University of Birmingham in the UK.

Ruto’s administration has been increasing tax rates and introducing measures to make the East African nation less reliant on borrowing, in line with fiscal reforms agreed with the International Monetary Fund (IMF) in 2021.

The Finance Bill was geared at raising 302 billion shillings ($2.3-billion) in additional revenue to help plug a budget deficit equivalent to 3.3% of gross domestic product. The IMF, which helps countries with balance of payments deficits, often recommends austerity measures to fix the fundamentals of economies, which often amounts to acute short-term pain as the price for longer-term stability. 

The IMF has declined to comment since the protests erupted last week.

The combination of a young population facing economic challenges has been a huge burden for African nations, as seen in the reactions to the tax law, according to Simon Quijano-Evans, chief economist at Gemcorp Capital Management. “Sub-Saharan Africa needs renewed access to a more affordable combination of public and private global capital and it needs that to happen fast,” he said. 

Kenya’s 2031 dollar bonds reversed earlier losses after Ruto’s statement to trade slightly stronger on the day, with the yield at 10.67% by 6.56pm in Nairobi. DM