The Chief Minister of Kenya, Musalia Mudavadi has submitted an economic repair plan to the International Monetary Fund (IMF), with expectations that the fund’s board will review it for approval at the end of August 2024.
Following widespread youth-led protests against tax hikes proposed by President William Ruto’s government, which resulted in at least 50 deaths, Kenya had to quickly devise new spending cuts.
Chief Minister Musalia Mudavadi informed a parliamentary panel that the Treasury had engaged robustly with the IMF despite the setback caused by the tax-hike protests. “It is our desire and hope that Kenya’s proposition will receive favorable consideration so that we can move beyond the challenges that we are facing,” Mudavadi told the parliamentary budget committee on Tuesday.
The IMF has not yet commented on the situation. Kenya is currently under a $3.6 billion IMF program, and a staff-level agreement on the seventh review of Kenya’s program was reached in early June. However, the IMF board had not approved the review when President Ruto rescinded the tax hikes, which were crucial for meeting IMF targets. Investors have indicated that the political turmoil may complicate Kenya’s access to IMF funds.
At the time of the review, Kenya sought IMF waivers after failing to meet two targets related to balancing the budget and tax collection. Under the revised spending plan for the 2024/25 financial year, the budget deficit is projected to rise to 4.2% of gross domestic product (GDP), up from 3.3% before the finance bill was withdrawn.
Ayodeji Dawodu, head of Africa research and strategy at BancTrust & Co, noted, “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.”
