The World Bank has warned Kenya may come under pressure to subsidise cost of living even as revenues decline posing a huge domestic risk in stabilizing the country’s financial crisis.
The Bank, which projects Kenya to grow around 5 percent this year, said the outlook faces domestic risks in spending pressures to curb cost of living and lower tax collections.
Global risks to the projected growth include weaker than anticipated growth in Europe, elevated global commodity prices that can increase Kenya’s import bill and increase the cost of reducing inflation, and further tightening of financial conditions in advanced economies.
Kenya has seen a decline in purchasing power as workers incomes stay stagnate while inflation is rising from expensive imports, shilling depreciation and government taxes that has seen civil society and opposition hold protests over the cost of living.
“Domestic risks are mostly linked to spending pressures to reduce the high cost of living and a slowdown in tax efforts,” the Bank said in the Kenya Economic Update press release.
While the government is hell bent on pushing through a Finance Bill that further increases taxes to meet IMF and World Bank conditions for loans, the move is increasingly becoming politically untenable with the Bank now recognizing the government might be forced to protect Kenyans tethering to the edge.
On Tuesday, activists protesting the Finance Bill 2023 gathered at Jevanjee Gardens in Nairobi where the police fired tear gas to disperse the protesters. Fifteen of the rioters got arrested by the police during the demonstrations at the Nairobi CBD.
The anti-riot police blocked access to KICC to keep out the protesters. The angry protesters evaded the police barricade to access the CBD by vandalising the road barricades. The streets were deserted and businesses closed due to the riots.
They chanted “down, down finance bill” while marching to parliament to express their grievances. According to the activists, the Bill contravenes the rights of the people and they shall not relent on their push to have it stopped.
The Finance Bill 2023 moves to its Second Reading stage of the law-making process and will be debated on Thursday after parliament resumed following a recess.
Kenyans want to see whether some of the contentious proposals will be amended before the bill is passed into law by the Parliament.
The Bill has been greatly contested by the members of the public since its First Reading and the government seems unable to find a proper way to deal with the public so that they feel heard given officials have sworn to pass it despite the huge opposition during public participation.