Kenyan President William Ruto must be drunk on drugs as his plans to raise taxes on his cash-strapped, debt-ridden government suffer another setback.
After the recent widespread anti-tax protests, which saw parliament set on fire, he bowed to public pressure and withdrew his financial account for the coming year.
But last week, the appeals court threw out his tax plans from last year.
Three judges unanimously ruled that the 2023 legislation, which raised taxes on salaries, fuel and mobile money transactions, was “fundamentally flawed” and “unconstitutional” because it failed to follow established procedures.
Both measures pose a challenge for the government to raise additional money to finance the national budget and service the $78 billion (£61.4 billion) national debt.
Ndindi Nyoro, chair of the parliamentary budget committee, told the BBC that the latest ruling could lead to significant shortfalls in this year’s budget and limit the government’s ability to manage its affairs.
“If you look at the two financial laws that have now been dropped, cumulatively we are talking about a revenue loss of over half a trillion shillings ($3.8 billion),” Mr Nyoro said.
Before the start of each fiscal year in July, the government submits a budget bill to parliament, introducing new taxes or amending existing taxes, mainly to raise more money.
Around the same time, the government also presents a so-called budget bill. This bill shows how the income is distributed and spent among the various government departments.
The chaos in government finances became clear when this year’s budget bill was signed and the accompanying budget bill to finance the spending plan was withdrawn.
With the government’s tax plans having fallen through for the second year in a row, analysts say spending may need to be brought into line with financial regulations from 2022.
Economist Odhiambo Ramogi says the latest court ruling also creates uncertainty for taxpayers, even though the court ruled that taxes already collected cannot be refunded.
The government has appealed the ruling to the Supreme Court, the country’s highest court, asking for the lower court’s decision to be suspended until the appeal is heard.
It was argued that it was not feasible to immediately adapt the systems to the 2022 legislation and that the situation could lead to a paralysis of certain government services.
The Supreme Court declined, but agreed that the case was urgent and said it would be heard this month, even though the case is normally in recess in August.
According to economist Ken Gichinga, the pressure is likely to increase immediately as financially struggling Kenyans seek to lower prices.
A good example of this is gas pumps.
“People want clarity on fuel prices,” he told the BBC.
According to Mr Ramogi, the best option for the government is to “draft a new financial law”.
But since Kenyans are strongly opposed to new taxes, the alternative would be to borrow more, he says.
But that too could prove difficult, given the country’s high debt levels and the recent downgrade of its credit rating by international credit rating agencies Moody’s and Fitch.
Others propose to raise the tax in a way that is innovative and not too burdensome for the population, but exactly how is not clear.
All experts agree that legislators should take public opinion into account in future tax legislation.
“Our national engagement and discussion on public affairs is shifting,” policy and governance expert Vincent Kimosop told the BBC, explaining that Kenyans are now actively participating in how their country is governed.
The cuts will also have to continue.
Mr Nyoro said the government has already made significant cuts and could still have to cut the entire development budget and salaries for government employees.
“I would hate to see the education budget cut, higher education funding disrupted, government workers laid off, and health care destroyed,” he said.
The biggest problem facing the Kenyan economy is the debt burden the country has built up over the past 12 years, he added.
In response to the withdrawn budget law, Mr Ruto on Monday signed a supplementary budget law to address the drop in expected revenues.
Government spending will be cut by about $1.2 billion, through cuts to the presidency, ministries and funding for transportation and other development projects.
The measure has been touted by the parliamentary budget committee as “reducing expenditure, with a delicate balance between austerity measures and accommodating the living conditions of the population and the economy”.
But the government is also facing legal problems. Two human rights organizations are challenging the government’s authority to spend money without generating revenue.
They claim that the supplementary budget process in parliament was not conducted according to the law and have asked the court to intervene to “put an end to the continued undermining of our constitution”.
The government will have to deal with this through the courts while it awaits the outcome of its appeal to the Supreme Court.
Mr Nyoro says there is “no guarantee of success” for the government in its legal cases. Moreover, the choices facing Mr Ruto are tough and even a bulletproof vest offers him little protection.
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