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The violent unrest that forced Kenya’s president to withdraw support for a finance bill has left the country’s efforts to meet International Monetary Fund targets in doubt and could make borrowing more costly, investors and analysts said.
The bill included unpopular levies on bread, vegetable oil and sugar, mobile-money transfers and some imports.
It had been meant to raise 346 billion Kenyan shillings (Rs 22,347 crore), or 3 per cent of GDP, in additional revenue, Morgan Stanley’s Neville Z. Mandimika wrote in a note.
Its withdrawal “will likely result in Kenya missing the 4,7 per cent fiscal deficit target this year and 3,5 per cent target next year as per the IMF programme,” he said.
The IMF did not immediately comment on whether it would shift Kenya’s required targets.
“Our main goal in supporting Kenya is to help it overcome the difficult economic challenges it faces and improve its economic prospects and the well-being of its people,” IMF spokesperson Julie Kozack said in a statement.
Kenya agreed a four-year loan with the IMF in 2021, and signed on for additional lending to support climate change measures in May 2023, taking its total IMF loan access to US$3,6 billion (Rs 30,016 crore).
The IMF requires regular reviews of reforms – in Kenya’s case every six months – before it releases tranches of funding.
Kenya reached a staff level agreement with the IMF earlier this month on a seventh review – before President William Ruto abandoned the tax bill on Wednesday – even then warning of revenue shortfalls. The review in theory paves the way for $976 million (Rs 8,137 crore), but it had not secured crucial IMF board sign-off. – Reuters
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