AFRICA

Kenya Presents New Economic Strategy To IMF After Tax Hike Protests

Kenya has put forth an economic recovery plan to the International Monetary Fund (IMF) and anticipates that the fund’s board will evaluate it for approval by the end of August, as stated by the country’s chief minister during a parliamentary session.

Kenya had to quickly devise new budget reductions following significant youth-driven protests against proposed tax increases by President William Ruto’s administration, which resulted in at least 50 fatalities.

Chief Minister Musalia Mudavadi indicated that the Treasury has engaged in intensive discussions with the IMF despite the setback from the tax hike issue.

“It is our desire and hope that Kenya’s proposition will receive favourable consideration so that we can move beyond the challenges that we are facing,” Mudavadi told the parliamentary budget committee.

The IMF has yet to respond to the situation. Kenya is involved in a $3.6 billion program with the IMF, and the Fund had reached a preliminary agreement on the seventh review of Kenya’s program in early June.

However, the IMF board had not approved the review after Ruto abandoned the tax increases, which were crucial for meeting IMF objectives, leading investors to believe that securing IMF funds would become more difficult due to the political unrest.

During the review, Kenya sought waivers from the IMF after not meeting two critical goals concerning budget balance and tax revenue.

Mudavadi mentioned that under the revised budget plan for the 2024/25 fiscal year, the budget deficit is expected to increase to 4.2% of GDP, up from 3.3% following the retraction of the finance bill.

Ayodeji Dawodu, head of Africa research and strategy at BancTrust & Co, remarked “The revision to the deficit barely a week after the initial plan underlines the herculean task faced by the authorities to achieve their fiscal consolidation goals.”

Nancy Mbamalu 

Source: Reuters 

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