NAIROBI, Kenya – Kenya is set to seek new financing from the International Monetary Fund (IMF) as the country grapples with the economic fallout from deadly protests that have forced President William Ruto to abandon plans for over $2 billion in new taxes.
Treasury Principal Secretary Chris Kiptoo revealed on Monday that Kenya has initiated discussions for a potential new program with the IMF and other financial institutions.
Speaking to lawmakers during the presentation of revised budget estimates, Kiptoo also mentioned ongoing negotiations with the World Bank for additional development policy financing.
Kenya’s existing three-year IMF program, valued at $3.6 billion, is set to conclude in April.
However, the IMF board is scheduled to meet at the end of August to approve a disbursement under the current program, according to Prime Cabinet Secretary Musalia Mudavadi.
Criticism has mounted against Kenyan authorities for accumulating debt, with approximately three-quarters of tax revenue being allocated to loan repayments.
Protests erupted in mid-June against new taxes aimed at boosting domestic income in alignment with the IMF program.
“In order for us to resolve our debt challenge, we have to have a program with the IMF. It cannot be otherwise,” Mudavadi stated. “If anybody continues to mislead people that you can walk away from the IMF and have your way, it is not true.”
Mudavadi emphasized that the burden of Kenya’s debt crisis lies with commercial loans rather than concessional debts from institutions like the IMF and World Bank.
He also dismissed the possibility of defaulting on the nation’s debt, contrary to the demands of some protesters, highlighting the necessity of having IMF and World Bank support to negotiate with creditors.
To address the forecasted drop in tax revenue, Kenya has been forced to slash its budget and increase borrowing.
In a supplementary budget awaiting parliamentary debate, the National Treasury has widened the fiscal deficit to 4.2% of GDP, up from the previously anticipated 3.3%.
Kenya plans to bridge this deficit through net external borrowing of 356.4 billion shillings ($2.72 billion) and net domestic borrowing of 404.6 billion shillings.
Kiptoo noted that these figures may be subject to change over the course of the year.
The revised revenue forecast is 9% lower than initial estimates, while spending has been reduced by about 2%.
“We have cut to the bone,” Mudavadi remarked regarding the spending reductions.
