False nails, pasta, cryptocurrencies, influencers… In order to bail out the state coffers, the Kenyan government is increasing new taxes, which are causing concern and resentment in this country plagued by economic difficulties, after the double shock of the coronavirus pandemic and the consequences of the war in Ukraine. Economic engine of the East African region of approximately 53 million inhabitants, Kenya is also facing high inflation (8% over one year in May) and a historic drought. Growth plateaued at 4.8% in 2022, a far cry from the 7.6% reached in 2021. Rising U.S. rates have, meanwhile, tightened credit conditions for that and other developing countries and fall the local currency. With 20% of Kenyan debt being denominated in dollars, repayment costs have skyrocketed.
President William Ruto seeks to generate more than 2.1 billion dollars in order to bail out the coffers of the State, heavily indebted in particular by the major infrastructure projects of his predecessor Uhuru Kenyatta, of which he was the vice-president. But the implementation of the new budget law presented at the beginning of July does not pass. Justice refused, on July 10, to lift the measure which prohibits the Treasury from implementing the new – unpopular – taxes provided for by this law. The case has been referred to the Supreme Court which will have to decide.
It is in this context that the International Monetary Fund (IMF) announced on Monday July 17 that it had validated a new tranche of aid of 415 million dollars for Kenya and reached an agreement for aid of 551 million dollars. additional. This payment comes within the framework of the fifth review of the commitments made by Kenya within the framework of its assistance program and brings to approximately two billion dollars the total amount already released, that is to say almost all of the funds planned.
The Fund’s Board of Directors also agreed to extend the program’s application period by 10 months “to allow sufficient time for the authorities to put in place their reform program”.
At the same time, he also validated the country’s access to an additional $551 million under its Sustainability and Resilience Fund (RSF), over a period of 20 months. The RSF is a fund that must finance climate transition and the implementation of measures aimed at enabling societies to adapt to the changes caused by global warming in poor and emerging countries. While the RSF may provide for a grace period, allowing States to begin reimbursement several years later, this will not be the case for Kenya, the duration of access to funds being based on the remaining time of the current program in course, or another twenty months.
The reforms planned under the RSF are intended to “strengthen efforts to integrate climate risks into the country’s fiscal policy and investment framework, reduce emissions with the creation of a carbon market and strengthen the management of risks associated with natural disasters,” IMF Deputy Managing Director Antoinette Sayeh said in the statement.
The country is facing one of the worst droughts in decades as well as internal unrest, as regular, sometimes violent, anti-government protests rock the country. The Kenyan opposition accuses President William Ruto of “stealing” the presidential election last August, which he won with 50.49% of the votes cast, against 48.85% for his challenger Raila Odinga. In recent days, tensions have escalated between the two camps. Odinga launched a protest movement and called for demonstrations on July 19, 20 and 21 to demand the repeal of the new finance law, which he considers punitive. At least nine people were killed last week, and six more the previous week.