Kenya’s sovereign dollar bonds are sinking as anti-government protests threaten to derail President William Ruto’s $2.3 billion plan to balance the budget and make the country’s debt sustainable.
“Pictures of huge protests and people getting killed will always scare investors, hence the underperformance” in bonds, said Soeren Moerch, a money manager at Danske Bank AS. “It will be interesting to see if government will back down, and let the protesters win and not do much needed tax reforms for a better future for all Kenyans.”
The protests began after Ruto pushed for taxes on everything from motor vehicles to mobile-money transfers to help stabilize the state’s finances. Kenya agreed an economic plan with the IMF in 2021 that commits the government to reducing the budget deficit, boosting revenue collection and curbing wasteful spending.
“Additionally, there is significant opposition to the ambitious budget,” he wrote. “This underscores the challenges Kenya faces in making its debt sustainable.”