confidentially speaking
The Africa Confidential Blog
Will Ruto rethink his austerity plan as protests spread?
Blue Lines
The political costs of the financial crisis in developing economies are emerging centre stage but not in predictable places. Debt-laden Ghana and Zambia are nearing the end of their tortuous debt restructuring negotiations while citizens take the brunt of public spending cuts. None of that has yet triggered a wave of determined protests in Accra or Lusaka.
Instead, the heaviest protests have been in Kenya, where President William Ruto had won an election last year by promising to build up the country's small businesses with cheap government finance and boost public health and education services. Kenya's debt-to-GDP burden of 68% is high but not catastrophic and its GDP is forecast to grow to 5.3% this year. That informed Ruto's belief that Kenya could tough out the next couple of years with an austerity programme and a spate of heavy tax rises hitting the middle classes but avoiding debt restructuring.
In the last month of protests against higher taxes and public spending cuts, at least 15 people lost their lives in Kenya. These demonstrations could become a fixture with neither side willing to give ground. Ruto may be willing to take that risk, but his strategy could do long-term economic damage. Greece's economic travails a decade ago showed that relying on tax rises to finance debt repayments can crash a fragile economy, turning a crisis into a prolonged depression.
