Latest news with #Smit-Lengton
TimesLIVE
2 days ago
- Business
- TimesLIVE
Kenya's budget to weigh revenue growth against public outrage
Kenya's finance minister will present a budget on Thursday aimed at boosting revenues to service debt while avoiding tax measures that triggered the kind of deadly protests that rocked East Africa's biggest economy last year. President William Ruto's administration has been struggling to narrow the fiscal deficit and govern under a heavy total debt-to-GDP ratio of about two-thirds, well above the 55% level considered a sustainable threshold. The government is seeking new sources of funding after last year's countrywide protests forced it to pursue austerity measures and scrap planned tax hikes worth more than 346 billion Kenyan shillings ($2.7bn). 'Kenyans cannot bear more tax,' finance minister John Mbadi said on Wednesday. 'For the first time, we have not added taxes in the current finance bill as has been the case before.' Critics have accused the government of using the budget to increase indirect taxes and infringe on privacy by empowering the tax authority to spy on people's bank accounts and mobile money transactions. But Mbadi said on Wednesday the revenue authority must be empowered to collect taxes to run the country. In place of hiking individual taxes, Mbadi is looking to widen the tax base, improve compliance and cut spending, said John Kuria, a tax specialist and partner at Kody Africa. 'They understand that people are not very happy, especially with the government and how the taxes are being used,' Kuria said. Despite government attempts to tighten expenditure and crack down on fraud, 'I think we're still going to have a significant funding shortfall,' he said. While the proposed budget outlines credible measures to reduce the fiscal deficit, the challenge lies in implementation, which Kenya has struggled with historically, said Shani Smit-Lengton, senior economist at Oxford Economics Africa. This often results in midyear revisions through supplementary budgets, which erode fiscal credibility, Smit-Lengton told Reuters via email. Kenya said in March it had applied for a new lending programme from the International Monetary Fund (IMF) after abandoning the final review on the previous IMF programme. In February it joined a fast-growing club of African nations that have gone to the market to borrow cash to pay off maturing debts in a bid to smooth out liabilities and ring-fence critical expenditures like health. 'This year, the stakes are higher: the government must demonstrate improved budget discipline to bolster its case for a new IMF programme, while also managing public sentiment to avoid social unrest. 'Achieving this balance will be critical to maintaining both investor confidence and domestic stability,' Smit-Lengton said, adding that the government's target of reducing the fiscal deficit to 4.5% in the next financial year was overly optimistic.
Yahoo
19-03-2025
- Business
- Yahoo
World's Worst Currency Faces Pain as Tanzanian Imports Boom
(Bloomberg) -- Tanzania is one of Africa's fastest-growing economies, but it may be some time before the local currency benefits. The Dark Prophet of Car-Clogged Cities Washington, DC, Region Braces for 'Devastating' Cuts from Congress NYC Plans for Flood Protection Without Federal Funds A Malibu Model for Residents on the Fire Frontlines The shilling has weakened 8.9% this year as of Tuesday, making it the world's worst-performing currency. That's as imports and public debt are rising for infrastructure investments that are helping to stoke gross domestic product growth projected at 6% this year. The shilling may see more declines before it recovers. A widening current-account deficit and potential liquidity constraints, which Tanzania often experiences at the start of the year, are putting pressure on the shilling in the short term, said Shani Smit-Lengton, a senior economist at Oxford Economics Africa. Still, the infrastructure spending will pay off in the long run, she said. 'As long as the government ensures efficient implementation of the projects and keeps debt at a sustainable level, these projects should yield positive results and strengthen the shilling,' Smit-Lengton said. 'We expect these investments to deliver long-term returns.' Tanzania is ramping up spending on projects including a deep-water container port at Bagamoyo, near Dar es Salaam. India's Adani Ports and Special Economic Zone Ltd. won the concession to operate the harbor. Other projects include the 1,443-kilometer (897-mile), $5 billion East African Crude Oil Pipeline that will transport crude from fields in landlocked Uganda to Tanzania's port of Tanga. The Export-Import Bank of China, which lined up a number of lenders from the Asian nation, is backing the pipeline, set to start operating next year. Tanzania already produces natural gas, which it uses to generate electricity, and plans a $42 billion liquefied natural gas facility to be built by a consortium comprising Shell Plc, Equinor ASA and Exxon Mobil Corp. While those investments and others are expected to boost economic growth in the long term, they're fueling the import and debt boom that's weighing on the shilling. Imports of goods and services rose 5% in the year through January to $16.9 billion, according to the Bank of Tanzania. That was driven by increases in purchases of industrial supplies and transport equipment, reflecting higher activity in the manufacturing, construction, and transportation sectors, the central bank said in its monthly economic review. The country's national debt stock, including government and private-sector debt was 'broadly stable' at $47.6 billion, the bank said. External debt climbed 11.5% to $33.9 billion in the year through January, according to central bank data. 'We expect government debt to continue to rise in the coming years, although it is likely to remain below the International Monetary Fund's 50% of GDP threshold until at least 2028,' said Smit-Lengton. The Tanzanian currency was little changed on Wednesday at 2,641.23 per dollar, the weakest level on a closing basis since Nov. 28. There is demand for dollars coming from oil and gas, manufacturing, mobile network operators, construction and trade sectors, said Nelson Kishanda, head of treasury at Exim Bank Tanzania Ltd. 'These sectors have grown year-on-year and hence increased demand for dollars,' Kishanda said. 'The medium-term outlook is that we expect the shilling to trade in the 2,620 to 2,650 range.' --With assistance from Fumbuka Ng'wanakilala. (Updates currency move in) Tesla's Gamble on MAGA Customers Won't Work The Real Reason Trump Is Pushing 'Buy American' The Future of Higher Ed Is in Austin A US Drone Maker Tries to Take Back the Country's Skies How TD Became America's Most Convenient Bank for Money Launderers ©2025 Bloomberg L.P. Sign in to access your portfolio
