Tires set on fire by protesters in the slum of Kibera (Kenya), during a demonstration against government tax hikes, in Nairobi, July 19, 2023. MONICAH MWANGI / REUTERS
On Wednesday July 19, opposition rallies in Kenya, although calmer than in previous weeks, left at least two dead and led to more than 300 arrests. At the beginning of July, the demonstrations had led to significant violence, in particular by the police, causing the death of at least twenty people.
Two new days of mobilization, Thursday and Friday, are still planned for the appeal of Raila Odinga, unsuccessful candidate in the presidential election of August 2022, against the high cost of living and the new taxes introduced by the finance law 2023-2024. The Kenyan veteran is not the only one to criticize this text, challenged in court then suspended on June 30, pending a decision on the merits, by the High Court of Kenya, which judged certain measures “illegal”.
This text introduces several new taxes: a 3% levy on wages to finance an affordable housing fund; doubling of VAT on fuels (to 16%); increase to 35% (against 30% previously) of income tax above 3,600 dollars (3,200 euros) and even introduction of a 15% tax on the income of influencers. Curiously, the law abolishes, on the other hand, taxes on helicopters, the favorite means of transport of Kenyan politicians.
Since his election almost a year ago, President William Ruto has shown his desire to significantly increase tax collection. Indeed, the number of contributors remains very limited and the collection rate in relation to gross domestic product (GDP) was 13% in 2021, according to the World Bank. The Head of State also promises to reduce the weight of the debt (62% of GDP in 2022), which has grown strongly under his predecessor – of which he was number two for ten years – in order to finance infrastructure in particular.
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This eagerness, in a developing country facing multiple emergencies such as the health or employment of its young population, but also a record drought since 2022, is explained by concerns about a potential default on the debt. Economic powerhouse of East Africa, notably endowed with a fairly solid banking sector, Kenya worries the markets.
Release of a new loan line
The shilling continues to weaken (to around 141 to the dollar, from 106 in mid-2021). In local banks, the loan default rate is increasing. As for the State, it has paid its civil servants late several times in recent months. « It is already a fault, a national fault. You are failing people in the public service who cannot turn to external donors ”annoyed Michael Chege, an expert in the economy and international politics of Kenya.
You have 53.18% .. “”.