Kenya is pursuing a new agreement with the IMF due to significant debt challenges. As the current $3.6 billion programme nears its end, debt servicing consumes much of the government’s revenue. Protest against tax increases previously hindered progress, prompting a reevaluation of fiscal policies to secure a more favorable agreement with the IMF.
Nairobi reports that Kenya will seek a new agreement with the International Monetary Fund (IMF) as the current programme nears its conclusion. Despite being regarded as an economic bright spot in East Africa, Kenya faces significant challenges, including approximately $80 billion in external and domestic debt. Debt servicing consumes two-thirds of the nation’s annual revenue, overshadowing expenditures on health and education, while the government struggles to enhance tax revenues.
Last year, widespread demonstrations erupted after President William Ruto proposed tax increases. In response, the IMF acknowledged a formal request for a new programme from Kenyan authorities, stating their intention to engage in discussions moving forward. Consequently, IMF officials agreed with the government to forgo the planned ninth review of the existing $3.6 billion lending programme set to conclude in April, which includes a final disbursement of $606 million due in October.
The specifics of the new IMF programme remain uncertain. Economist Churchill Ogutu remarked, “It’s not surprising that they are shelving the ninth review completely because of the non-adherence to the targets,” suggesting that Kenya’s failure to meet tax increase commitments may hinder future funding opportunities. He further indicated that the Kenyan authorities might consider developing a more favorable tax policy environment to avoid the protests witnessed last year.
In summary, Kenya’s challenges regarding significant debt and tax revenue generation have prompted the government to seek a new agreement with the IMF. The decision to forgo the ninth programme review highlights existing discrepancies in meeting financial targets. Economists suggest that addressing tax policies may be critical for government stability and securing future funding.
Original Source: www.thenews.com.pk
