Experts Explain Power of Kenyans' Petition to IMF

  • The IMF headquarters building in Washington, U.S.
    The IMF headquarters building in Washington, U.S.
    File
  • The government's latest Ksh255 billion loan from the International Monetary Fund (IMF) has caused an uproar among Kenyans who have decried the economic crisis within the country.

    This has led to over 150,000 Kenyans signing a petition asking the International body to cancel the loan. Further, #StopGivingKenyaLoans has been trending for the past three days as more people raised concerns over the government's borrowing spree. 

    Speaking to Kenyans.co.ke, renowned economist and political strategist Dr. David Ndii affirmed that the petition does not hold power to refrain or cancel IMF from giving Kenya the loan.

    A file image of Treasury CS Ukur Yatani
    A file image of Treasury CS Ukur Yatani
    Citizen Digital

    "IMF acts for creditors, it doesn't act for Kenyans. For instance, if a bank sends a receiver-manager to your business you don't start telling the receiver-manager what they can or can't do.

    "I have been telling Kenyans that IMF is not here to help us, in fact when you see IMF it spells trouble since it's usually a sign that a country has hit rock bottom in terms of their debt situation," Ndii stated.

    His words were echoed by economist Tony Watima who pointed out that the petition does not hold the power to cancel but might help get the attention of the IMF executive board.

    "As for the petition signed by Kenyans, it might help by getting the attention of IMF after it releases the first batch of the funds," Watima stated.

    Both economists affirmed that the majority of people misunderstood IMF's role and its relationship with the Kenyan Government.

    "IMF is usually the last resort a country opts for when it's in an economic crisis. Ideally, when a country is heavily indebted and on an unsustainable path, the government invites IMF to come in and help restructure back to sustainability through loans. However, conditions are placed before the loan is approved," Watima stated.

    He added that in the case of the Ksh255 billion loan, it's meant for budgetary support which involves the balance of payments, constitutional and public sector reforms in order to stabilise the country's economy.  

    "The IMF loan Kenya has taken is called a structural adjustment loan. This means that the government will institute tax raises, spending cuts, downsizing of operations in order to keep Kenya creditworthy so that we continue borrowing and servicing debt. IMF is not here for fun," Ndii weighed in on the matter.

    Watima also revealed that the loan is usually disbursed in batches whereby the first batch would see Kenya acquire Ksh35 billion. For the government to get the second batch, it needs to have met the conditions stipulated by IMF.

    Both pundits however pointed out the dire consequences the country can face if Kenya defaulted on the loan. 

    "If Kenya defaults, our banks cannot get credit lines meaning we cannot import anything so we get locked out of the global financial system," Ndii stated.

    The loan crisis within the country has been a cause of concern for many Kenyans who have been left grappling with the high cost of living and economic crisis.

    President Uhuru Kenyatta during a previous press briefing
    President Uhuru Kenyatta during a previous press briefing
    PSCU