Kenya plans to pursue a new agreement with the IMF as its existing program ends. The nation faces $80 billion in debt, with debt servicing dominating revenue. Public protests over tax increases have occurred, complicating tax reforms. The IMF has acknowledged the request from Kenyan authorities and ceased the current program’s review due to unmet targets.
Kenya is poised to negotiate a new agreement with the International Monetary Fund (IMF) as its current program nears completion. The nation, viewed as an economic beacon in a struggling East African context, is wrestling with approximately $80 billion in outstanding debts. The burden of debt servicing consumes two-thirds of Kenya’s annual revenue, significantly overshadowing expenditures on vital sectors such as health and education. The government has faced challenges in augmenting tax revenue, leading to public discontent and demonstrations over a proposed tax increase by President William Ruto last year.
The IMF confirmed it has received an official request from Kenyan authorities for a new program and will engage with them accordingly. As part of this transition, officials agreed to forgo the planned ninth review of the existing $3.6 billion lending program, which commenced in 2021 and is set to conclude in April, with a final disbursement of $606 million anticipated in October. The specifics of any new program remain uncertain.
Economist Churchill Ogutu from the financial consulting group IC commented on the shelving of the ninth review, citing Kenya’s failure to meet the IMF’s tax increase benchmarks. He expressed concerns that failing to address these expectations could hinder potential funding. Looking forward, Ogutu suggested that Kenyan officials might need to consider implementing a more favorable tax policy to avert public protests akin to those experienced last year.
In summary, Kenya is seeking a new agreement with the IMF following the nearing expiration of its current program amidst significant debt challenges. With a large proportion of government revenue consumed by debt servicing, the country has struggled to enhance tax collections, prompting public unrest. The forthcoming negotiations will likely focus on establishing an agreeable tax policy framework to foster cooperation and stability moving forward.
Original Source: www.thenews.com.pk
