Kenya's IMF assessment fails, leading to the withdrawal of a $850M payment
Kenya has failed to receive the ninth disbursement of its IMF Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs, amounting to $850M, due to delays in implementing key governance reforms. The IMF's Extended Credit Facility (ECF) program is designed to aid countries that spend more money than their generated revenue and need to borrow to finance their budget.
The primary reason for Kenya's failure to meet the program’s conditions is the government's inability to implement agreed-upon reforms, such as the Conflict of Interest Bill. This legislation aims to prevent politicians and public officials from influencing government tender awards to companies they or their associates own. President William Ruto initially rejected the bill, citing problematic clauses, and although the National Assembly made changes, the Senate blocked key provisions, including prohibitions on officials seeking public tenders and mandatory wealth declarations.
In addition, Kenya has failed to implement other key reforms, including adopting a single treasury account for all public finances and automating government procurement to prevent collusion and manipulation.
As a result, Kenya's spending exceeded its revenue at a rate higher than the IMF's conditions for the next disbursement. The IMF withheld the ninth disbursement, signaling that Kenya must comply with the agreed reform agenda to continue receiving financial support.
To secure a fresh deal with the IMF and unlock further funding, Kenya must complete all agreed prior actions, ensure an adequate macroeconomic policy framework, and possibly address structural issues related to public finance management and transparency.
This situation also mirrors the World Bank's suspension of a $750 million loan for similar reasons, underscoring the critical linkage between governance reforms and funding commitments by international financial institutions.
The IMF has agreed to a fresh program request from Kenya but has not yet disclosed the terms of the new program. Kenya is now looking to secure a fresh deal with the international lender of last resort, the IMF. The Kenyan government is expected to slash its fiscal deficit and ramp up revenue-raising measures, including tax increases, to qualify for the next disbursement under the program.
[1] References: The above information is based on various reports and news articles, including those from the International Monetary Fund (IMF), the World Bank, and local Kenyan media outlets.
- The ongoing delays in implementing key governance reforms in Kenya, such as the Conflict of Interest Bill, have led to an impasse with the International Monetary Fund (IMF), preventing the country from receiving $850M in financing.
- The Kenyan government's failure to adopt a single treasury account for all public finances and automate government procurement, as required by the IMF, has contributed to the country's inability to meet program conditions.
- The IMF's withholding of the ninth disbursement serves as a reminder of the importance of policy and legislation, like the Conflict of Interest Bill, in ensuring fiscal transparency and accountability, particularly in the context of crypto, defi, and finance business.
- In light of this situation, the Kenyan government is exploring tax increases to boost revenue and qualify for the next disbursement under the IMF's new program, highlighting the critical intersection between politics, general news, and international finance and policy-and-legislation.
