Kenya’s President William Ruto must be feeling dazed after his plans to raise taxes for his cash-strapped and debt-ridden government suffered another setback.

After the recent large-scale protests against the tax laws, in which Parliament was set on fire, he bowed to public pressure. and withdrew its financial draft for the coming year.

But then last week the appeals court torpedoed his tax plans from last year.

Three judges unanimously ruled that the 2023 law, which increased taxes on salaries, fuel and mobile money transactions, was “fundamentally flawed” and “unconstitutional” because it did not follow established procedures.

Both measures pose a challenge for the government to raise additional money to finance the state budget and service its $78 billion (£61.4 billion) national debt.

Ndindi Nyoro, chairman of the parliamentary budget committee, told the BBC that the latest decision could lead to significant deficits in this year’s budget and limit the government’s ability to conduct its business.

“If you look at the two finance bills that have now fallen overall, we are talking about revenue losses of over half a trillion shillings ($3.8 billion),” Nyoro said.

Before the start of each fiscal year in July, the government submits a financial bill to Parliament that introduces new taxes or changes existing ones, primarily to raise more money.

At about the same time, the government also presents a so-called budget law, which sets out how the revenues are to be distributed among the individual ministries and spent.

The chaos of public finances became clear when this year’s draft budget came into force while the corresponding financial bill to finance the budget was withdrawn.

With the government’s tax plans virtually doomed to failure for two years in a row, analysts say spending may need to be adjusted to comply with financial legislation starting in 2022.

Economist Odhiambo Ramogi says the recent court decision 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 that the lower court’s decision be stayed pending the appeal.

The company argued that an immediate reconfiguration of the systems to the 2022 legislation was not possible and the situation could lead to a paralysis of some government services.

The Supreme Court rejected this but acknowledged that it was an urgent matter and that the case would be heard this month – although there is usually a recess in August.

The immediate pressure is likely to come from financially strapped Kenyans who want lower prices, says economist Ken Gichinga.

A typical example of this is petrol stations.

“People want clarity on fuel prices,” he told the BBC.

Mr Ramogi argues that the best option for the government is to “re-draft another finance bill”.

However, since Kenyans are strongly opposed to new taxes, the alternative is to take out even more loans, he says.

But given the country’s debt burden and the recent downgrade of its rating by the international rating agencies Moody’s and Fitch, this too could prove difficult.

Others believe that the solution could lie in innovative tax increases that do not place too great a burden on the population – but what this should look like in detail is not clear.

All experts agree that legislators must take public opinion into account when designing future tax laws.

“Our national engagement and discourse on public affairs is changing,” political and government expert Vincent Kimosop told the BBC, explaining that Kenyans are now actively participating in the leadership of their country.

In addition, spending must be cut further.

Mr Nyoro said the government had already made significant cuts and may still be forced to cut its entire development budget as well as civil servants’ salaries.

“I don’t even want to imagine the education budget being cut, higher education funding being interrupted, civil servants being laid off or the health care system collapsing,” he said.

The biggest problem for the Kenyan economy is the debt burden the country has accumulated over the past twelve years, he added.

In response to the withdrawal of the Finance Bill, Mr Ruto signed a supplementary budget bill on Monday to accommodate the expected reduction in revenue.

Government spending will be cut by around $1.2 billion, including through cuts to the presidency, ministries, and funding for transport and other development projects.

Parliament’s Budget Committee praised the move as “a reduction in spending that strikes a delicate balance between austerity and cushioning the livelihoods of the population and the economy.”

However, the government also faces further legal problems: two human rights groups are challenging the government’s authority to spend money without generating corresponding revenue.

They argue that the supplementary budget process in Parliament was not lawful and have called on the courts to intervene to “put an end to the ongoing undermining of our Constitution”.

The government will have to deal with the matter in court while it awaits the outcome of its appeal to the Supreme Court.

Nyoro said there was “no guarantee of success” for the government in its legal battles. Mr Ruto was facing difficult decisions and even a body armor offered him little protection.