Why Ruto Will Increase Taxes To Historic Level This Year- UN
A United Nations report, titled World Economic Situation and Prospects 2024, has cautioned citizens of Kenya about a rise in financial strain expected in the year 2024.
As per the report, citizens will face higher taxes due to the government dealing with decreased income, with a majority of the funds collected going towards paying off the maturing Eurobond.
Kenya was included alongside South Africa and Egypt among the countries expected to face increased taxation due to the implementation of new fiscal policies.
Due to the rising debt, Kenya is projected to allocate more than 20 percent of its tax revenue towards paying off interest.
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“Due to high and rising debt-servicing burdens, essential government spending on education and health care is taking a back seat in public expenditure allocation,” read part of the report.
The findings indicated that the interest rates for loans taken by African nations are roughly fourfold higher compared to those for more developed nations.
Moreover, the United Nations observed that the ongoing issue of debt sustainability will persist in hampering the potential for economic growth in nations across Africa.
Luckily, the African Union is currently in the process of creating a self-sufficient credit rating system. This aims to offer fair and thorough risk assessments for African nations, ultimately reducing their borrowing expenses in the global financial markets.
Kenya’s Debt
President William Ruto pledged to achieve self-reliance for Kenya by settling the debts accumulated by past administrations and simultaneously enhancing the nation’s economic condition.
In November, Ruto cautioned about challenging times approaching as the nation prepares to settle its outstanding debts, which encompass the repayment of the Ksh500 billion Eurobond.
This marked the initial payment towards settling the USD2 billion Eurobond due to maturity in 2024.
“We have had to make hard decisions and make painful choices because we owe the people of Kenya to do the right things and to confront facts as they are,” he stated while addressing Parliament.
In addition to the Eurobond, Kenya has obtained financial loans from various global lenders such as the World Bank, the International Monetary Fund (IMF), and the African Development Bank (AfDB).
In 2023, Kenya was one of five nations that experienced a downgrade from three prominent global credit rating agencies, namely Moody’s, Standard & Poor’s, and Fitch. These financial organizations cautioned that Kenya faced the possibility of failing to meet its credit obligations.
Why Ruto Will Increase Taxes To Historic Level This Year- UN