NAIROBI, Sept 17 (Reuters) – Kenya’s finance ministry forecasts a fall in the budget deficit to 3.5% of gross domestic product (GDP) in the 2025/26 fiscal year that starts next July, from 4.3% of GDP in the current fiscal year, a draft budget document showed.

President William Ruto scrapped tax hikes worth more than 346 billion shillings ($2.7 billion) in June in the face of youth-led demonstrations that created the biggest crisis of his two-year-old presidency.

The tax hikes were meant to increase revenue this fiscal year, but the government opted for spending cuts and more borrowing after they were pulled.

The budget deficit is expected to drop further to 3.3% of GDP in the 2026/27 fiscal year, the finance ministry said in the draft budget outlook paper seen by Reuters on Tuesday.

($1 = 128.5000 Kenyan shillings)

(Reporting by George Obulutsa; Editing by Alexander Winning and Ros Russell)