The Chairman of President William Ruto’s Council of Economic Advisors, David Ndii, on Wednesday, announced that the government of Kenya could soon stop relying on the International Monetary Fund (IMF) for loans to aid in development projects reporting that the country’s economy is on the mend.
“We would like to get out of an IMF program. We’ve turned the corner, the global financial shocks are receding, and we are beginning to grapple with our fiscal shocks,” Ndii stated.
Ndii spelled out that acquiring more loans would bring in more uncertainty and create heavier costs, hurting the country's economy more instead.
“We’ve reached that fork of the road where we have to decide whether we get stuck in concessional financing, or whether we should go where middle-income countries are, which is the market. We’re a frontier market. Should we be looking to go to an emerging market and be subject to market discipline?”
Over the past few years, the country has concentrated more on concessional borrowing as high global interest rates raised the cost of raising debt on international markets. In June this year, Kenya refinanced a matured $2 billion Eurobond loan, further reflecting this.
These thoughts by Ndii come barely a week after the seventh and eighth reviews by the IMF ended and the global financier opened the door for Kenya to acquire a loan of approximately Ksh78 billion to be disbursed in two consignments.
In the final report after months spent evaluating and reviewing Kenya’s economy to assess if it is capable of repaying the $606 (Ksh78 billion) loan, the IMF reported that the Kenyan economy had remained resilient, recording a growth above the regional average.
“Kenya’s economy remains resilient with growth above the regional average, inflation decelerating, and external inflows supporting the Shilling and a buildup of external buffers, despite a difficult socio-economic environment,” stated Gita Gopinath, First Deputy Managing Director of the IMF and acting chair in the report.
If Kenya steps out of IMF’s aid, it could mean even more taxation on Kenyans who have already strongly opposed most of the taxes proposed by the government that culminated in anti-government protests in June.
Despite this, however, the rejected Finance Bill 2024 seems to be making a comeback in a series of new proposals being made in three new bills to be tabled in parliament including; the Tax Laws (Amendment) Bill, 2024, Tax Procedures (Amendment) Bill, 2024 and Public Finance Management (Amendment) Bill, 2024.
The government is seeking to raise over Ksh140 billion with the new tax proposals that target air tickets, airplanes, imports of sanitary towels and diapers as well as raising taxes on the internet and calls among others.
Even though he acknowledges Kenyans are not happy with the new tax regime Ndii opined that circumstances have pushed the nation to implement such much-hated tax directives.
“It was not the tax regime we would have chosen for ourselves. Having an IMF program compounds the problem because you’re trying to meet the structural benchmarks to enable the IMF to go to the board and disburse the next tranche of funding which precipitated the crisis over the new tax measures,” he stated.
