Kenya to Pursue New Agreement with IMF Amid Economic Challenges

Kenya plans to seek a new IMF agreement as its current program concludes. The nation faces approximately $80 billion in debt, heavily impacting revenue allocation towards health and education. IMF officials have halted the ninth review of the existing lending program, with economist Churchill Ogutu suggesting that tax policy reforms may be necessary to reduce public unrest regarding tax increases.

Kenya intends to seek a new agreement with the International Monetary Fund (IMF) as the current program approaches its conclusion. Despite being viewed as an economic beacon in the challenged East African region, Kenya is faced with approximately $80 billion in both external and domestic debt. This burden consumes two-thirds of the nation’s annual revenue, severely restricting healthcare and education spending, while tax collection efforts have proven insufficient.

Demonstrations occurred last year in response to a tax increase proposal from President William Ruto. The IMF confirmed receiving a formal request from Kenyan authorities for a new program and committed to ongoing discussions. Following this, IMF officials decided not to proceed with the anticipated ninth review of the existing $3.6 billion lending program initiated in 2021, which is expected to conclude in April with a final intended disbursement.

Economist Churchill Ogutu noted that scrapping the ninth review was unsurprising due to Kenya’s failure to meet essential targets, particularly concerning tax increases. He indicated that the absence of adherence to conditions could jeopardize funding opportunities. Moving forward, Ogutu suggested that the Kenyan authorities might pursue a more favorable tax policy to prevent public unrest witnessed in the previous year.

In summary, Kenya is poised to engage with the IMF for a new agreement amid significant economic challenges, including mounting debt that siphons resources from critical services. The decision to abandon the review of the current program underscores the struggles in meeting fiscal targets. Furthermore, a shift towards adaptable tax policies may be essential for fostering stability and avoiding further public discontent.

Original Source: www.jacarandafm.com