Kenya to Pursue New IMF Agreement Amidst Debt Challenges

Kenya plans to negotiate a new agreement with the IMF following the current program’s conclusion, as it struggles with $80 billion in debt. The IMF will engage with Kenyan authorities, having suspended the ninth review due to unmet targets. Analysts anticipate a need for more favorable tax policies to reduce public unrest and ensure future funding.

Kenya is set to pursue a new agreement with the International Monetary Fund (IMF), as announced by the IMF on Monday after the current financial program concludes. Although the nation is perceived as an economic bright spot within a troubled East African region, it confronts a substantial external and domestic debt totaling approximately $80 billion. This debt burden absorbs two-thirds of Kenya’s annual revenue, significantly overshadowing expenditures on vital sectors such as health and education, amidst challenges in tax collection.

The IMF reported that it has received an official request from the Kenyan government for a new program and will engage with them in subsequent negotiations. Due to the government’s non-compliance with the set targets, the IMF has decided to forgo the planned ninth review of its existing $3.6 billion lending program, which originated in 2021 and was poised to conclude by April, with a final disbursement of $606 million due in October.

Analyst Churchill Ogutu from the financial consulting firm IC Group remarked that the shelving of the ninth review was expected due to discrepancies in adhering to IMF requirements. He noted that since Nairobi failed to implement the anticipated tax increases, the likelihood of acquiring further funding could be jeopardized. He suggested that the Kenyan authorities may consider adopting a more favorable tax policy to mitigate the potential for public protests, similar to those experienced last year regarding President William Ruto’s tax proposals.

In summary, Kenya is seeking a new agreement with the IMF as the current program ends amid significant debt issues. The government’s challenges with tax collection have raised concerns about future funding. The economic stability of Kenya remains uncertain as it faces pressures to implement effective fiscal policies while managing public dissent.

Original Source: www.jacarandafm.com