People react at a demonstration over police killings of people protesting against Kenya's proposed finance bill 2024/2025, in Nairobi, Kenya, Jun 27, 2024. Bolivia's President and former economy minister Luis Arce fended off the putsch on Wednesday , but faces ongoing US dollar shortages and soaring borrowing costs that pushed the country's credit rating to"junk.
"It is not just the taxes," said Mary Ngigi, a 37-year-old clothing company worker in Kenya, on why she was protesting. Angola is also trying to cut subsidies, while Egypt is under pressure from the International Monetary Fund for a slew of spending cuts and reforms that could cause more pain for citizens reeling from record-high inflation above 30 per cent.
Rising borrowing costs mean debt service gobbles a growing chunk of revenues. This puts pressure on countries, including Kenya, to raise taxes and cut spending.In 2023, a record 54 developing countries, equivalent to 38 per cent of the total, allocated 10 per cent or more of government revenues to interest payments, with nearly half of them in Africa, according to a report from UN Trade and Development agency UNCTAD.
Over the past 20 years Kenya amassed some $82 billion of debt to build roads, railways and factories. But not all ambitious projects were completed and many Kenyans felt they had not benefited, while a slew of corruption scandals spurred allegations that elites enriched themselves. Kenya managed to avoid default by issuing more debt earlier this year - but at a punishing interest rate above 10 per cent. After this week's protest, the country's bond prices slid again."Kenya's government has a budget, and cash is not endless - so they need to prioritize," said Lutz Roehmeyer at Capitulum Asset Management.