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Kenya's future between debt and new unpopular choices

There are plans to reintroduce finance, albeit in disguise

20-08-2024 by Freddie del Curatolo

It is a very delicate moment for Kenya's economic policy, both domestically and internationally.
After the protests of the Kenyan youth, the so-called Generation Z, slowly faded until the last day in Nairobi, which was attended practically only by the activists who had first demonstrated at the end of last May against the financial law, the government, on the one hand, feels strengthened, on the other hand, it will soon be forced to take unpopular decisions, with the risk of seeing the people rise up again.
For days, rumours have been circulating in circles close to the institutions that President William Ruto is even thinking of asking parliament to reintroduce the same finance law, which he had been forced to eliminate after the demands of the public square, which resulted in an assault on parliament on the very day it was approved. On the strength of an enlarged majority with several members of the opposition, after four of them joined the new government as ministers, it would not be difficult to re-approve it, even if the technical timeframe for possible Court stops and rulings on possible petitions does not foresee this happening any time soon.
So the new Treasury Minister, John Mbadi, one of the opposition members who joined the government, after meeting the International Monetary Fund's representative for Kenya, announced his intention to reintroduce one of the taxes provided for in the financial bill and previously cancelled, namely the so-called ‘eco-tax’ of 10% on imported non-disposable and non-eco-friendly items, with the sole exception of sanitary towels, which had been one of the triggers for the protests, especially by women activists.
The motive is clear: there is a multifaceted attempt to scrape together the billion-plus dollars to make up the deficit caused by the failure to pass the 2025 budget, which included, among others, the controversial excise taxes on bread and vegetable oil and a circulation tax on cars based on their value.


Mbadi said that the government is in the final stages of drafting other tax-raising measures, through the Tax Amendment Bill, a proposal containing 47 amendments, and is almost ready for re-introduction in Parliament. In practice, there would be no talk of reintroducing the finance bill, but in fact all but the most unpopular taxes would be back in place.
If the IMF is pushing for Kenya to make an effort to recover contributions, on the other hand many multinationals had already opposed the eco-tax, threatening to leave the Kenyan market if it passed.
This included the giant Coca Cola.
Another softer route to try and raise money is to extend the tax amnesty period by six months, to allow more taxpayers to file their tax returns.
A final mention also goes to the fight against corruption, which, as First Secretary Musalia Mudavadi recently stated, eats up around $5 billion a year, or almost two finance bills.
For now, the only countermeasures have been identified in the continued and more efficient automation of revenue collection services, although this is certainly not enough.
While waiting for the decisions and how they will be absorbed by Kenyans, the local currency, the shilling, is managing to hold its own against the dollar, staying below 130.Tourism is also in the game, which in August between the sea and the great migration is bringing in some fresh remittances, euros, dollars, yuan and sterling, as part of a promising first half of the year for the sector. Kenya in fact recorded tourism revenue of 142.5 billion shillings in the first half of 2024, up 21.3 per cent from the same period in 2023, the Ministry of Tourism announced yesterday. 
This positive figure comes on top of the promise by the Monetary Fund of a new loan, which would partly cover the shortfall caused by the finance bill, hopefully capitalised as best it can and not dispersed in all too familiar meanderings. The rest, as always happens, will be taken care of by the pockets of those who work.

TAGS: tassefinanziariaeconomiaprotestetesoro

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