PREVIEW
The Fund has asked Ruto to restore the trust of the public by improving governance and transparency
The International Monetary Fund has given the green light for a combined disbursement of around US$606 million from its two loan facilities for Kenya but has spelt out the difficulties facing President William Ruto’s government.
Ministers ‘face a difficult balancing act of boosting domestic revenues to protect critical spending in priority areas while meeting heavy debt service obligations,’ stated the Fund in a release accompanying its latest staff review of Kenya.
The recent funding is composed of $485.8m under the Extended Fund Facility/Extended Credit Facility arrangements and about $120.3m under the Resilience and Sustainability Facility arrangement.
The IMF was itself a target for criticism from the Generation Z protest movement in June and July after encouraging the government to introduce a series of tax rises in its unpopular Finance Bill and taking little account of the role of political corruption in capturing and squandering resources (Dispatches 7/8/24, Ratings downgrade adds to pressure on new Treasury minister Mbadi).
In a nod to this, the Fund calls for ‘improving governance and transparency to restore public trust in the effective use of public resources’.
Although the Finance Bill was officially axed by Ruto in July, Treasury Cabinet Secretary John Mbadi, one of the five new ministers appointed in July from Raila Odinga’s Orange Democratic Movement, is expected to reintroduce many of its proposals to parliament in the coming weeks (AC Vol 65 No 22, Ruto’s impeachment of his Deputy starts to backfire).
IMF funding has been used by the Ruto government this year to pay Eurobond debts and boost its foreign exchange reserves, both of which have revived market confidence in the shilling.
However, a sizable tax revenue shortfall in the 2023/24 financial year and the withdrawal of the 2024 Finance Bill have left a significant budgetary hole.
The IMF has noted that Kenya’s ‘fiscal performance fell significantly short of the targets’.
Gita Gopinath, First Deputy Managing Director of the IMF, says that policymaking by Ruto’s ministers ‘needs to be agile’ and that ‘reforms to make the tax regime more efficient, equitable, and progressive as well as strengthening accountability, transparency, and efficiency of public finances will help garner political and societal support for reforms’.
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