PREVIEW
Mbadi has managed to reintroduce revenue measures from the Finance Bill without reigniting street activism but more than half of the expected gains have been lost
Treasury ministers are paving the way to take on more debt in the coming months, starting with a US$1.5 billion supplementary budget to make up for missed tax revenue targets in 2024/25.
The proposal was filed on 11 February and is set to be signed off by MPs in the coming weeks. The Treasury also cut its estimated annual revenue by $713 million and revealed that the deficit for the 2024/25 financial year will increase to around $650m.
Since being parachuted into the Treasury following the Generation Z protests against last year’s Finance Bill in June, which led to President William Ruto dismissing his cabinet, John Mbadi has walked a tightrope. He has reintroduced some taxes from the former bill without reigniting activism on the streets. Mbadi is the most senior of the five ministers from Raila Odinga’s Orange Democratic Movement who joined the Ruto administration last July.
However, more than half of the $2.66bn in tax increases outlined in the Finance Bill has been lost, and the government has continued to set overly ambitious collection targets for the Kenya Revenue Authority (AC Vol 65 No 22, Ruto’s impeachment of his Deputy starts to backfire).
This won’t surprise the International Monetary Fund and Kenya’s other multilateral lenders. In its last review of Kenya’s financing programmes, the IMF noted that the country’s ‘fiscal performance fell significantly short of the targets’ (Dispatches 6/11/24, IMF grants latest tranche of $600m but warns of ‘difficult balancing act’).
But it will affect the next budget. After cutting spending for 2024/25 from $30.9bn to $30bn, Mbadi’s 2025 budget policy statement has set out plans for a modest increase to $32.5bn.
Meanwhile, the Treasury’s budget policy statement sets out plans to defer 88.1bn shillings in IMF funding to the next financial year. Mbadi’s officials are set to open talks with the Fund for a new financing programme beyond the April end of the current Extended Credit Facility.
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