Kenya’s government faces tricky fiscal balancing act

Significance The government faces a difficult balancing act between compensating for the KES346bn (USD2.67bn) in planned revenues lost following the withdrawal of the Finance Bill 2024, placating a population that took to the streets this summer to denounce corruption and tax increases, and reassuring the IMF that revenue-led fiscal consolidation will continue. Impacts The exchange rate should remain broadly stable as fears of a default have dispersed and the shilling has strengthened. Amid declining inflation, a stable shilling and global rate cuts, the Central Bank should deliver further interest rate reductions in 2025. Legal hurdles and popular resistance will likely continue to hamper privatisation progress.