Kenyan President William Ruto engaged in a phone conversation with International Monetary Fund (IMF) chief Kristalina Georgieva shortly after retracting proposed tax increases totaling $2.7 billion, in response to recent deadly protests, according to two diplomatic sources familiar with the matter.
The tax hikes, integral to policy reforms under Kenya’s IMF lending program worth $3.6 billion, were withdrawn last week, potentially jeopardizing the country’s adherence to program targets. Despite this setback, Kenya managed to repay a $2 billion bond this year by issuing a new seven-year bond, alleviating immediate financial pressures.
Young Kenyan protesters, critical of the IMF’s role in the tax proposals, have directed their frustration towards the organization.
While details of Ruto and Georgieva’s discussion remain undisclosed, sources indicate consensus among major donors for IMF flexibility in adjusting program targets, given the bill’s withdrawal. Suggestions include Kenya demonstrating commitment to curbing wasteful spending, combating corruption, and enhancing accountability to qualify for revised IMF support.
The IMF had previously reached a staff-level agreement with Kenya in June on essential policy measures, pending approval from its Executive Board, expected to unlock substantial funds. However, ongoing protests and political developments may delay disbursements until later this year.
“I think the IMF will continue helping Kenya, but the disbursements are more likely to resume toward the end of this year,” commented Pavel Mamai, managing partner at Promeritum Investment Management.
Anti-government demonstrations persist following the bill’s shelving, although with reduced participation levels, amidst ongoing concerns about the recent spate of fatal incidents during protests.
For further inquiries, spokespeople for President Ruto and the IMF declined immediate comment on the matter.