Kenya to seek a new IMF agreement

NAIROBI: Kenya will seek a new agreement with the International Monetary Fund, the IMF said Monday, after the current programme winds to a close.

The country is currently considered an economic bright spot in the troubled East African region, but is grappling with around $80 billion in external and domestic debt.Debt servicing is eating up two-thirds of Kenya’s annual revenue, far outweighing spending on health or education, but the government has had difficulty raising taxes.

Demonstrations erupted last year over a proposal by President William Ruto to raise taxes.“The IMF has received a formal request for a new program from the Kenyan authorities and will engage with them going forward,” the IMF said in a statement during a visit to the country.

It said IMF officials had agreed with the Kenyan government not to proceed with the planned ninth review of its current $3.6 billion lending programme.That programme, signed in 2021, was scheduled to end in April with a final disbursement due in October of $606 million.

It was unclear what the new IMF programme would entail.“It’s not surprising that they are shelving the ninth review completely because of the non-adherence to the targets,” Churchill Ogutu, an economist with the financial consulting IC group, told AFP.

He added that because Nairobi had not met the IMF’s tax increase requirements, “it goes without saying that even if they pursued with that there’s a likelihood that they may not even get some funding”.Looking ahead, he suggested Kenyan authorities might attempt “a more amenable tax policy environment, so as to avoid the kind of protests that we saw last year”.