Kenyan Leader’s Economic Adviser Cautions Against More IMF Aid
Kenya’s economy is on the mend and the country is unlikely to need further assistance from the International Monetary Fund, according to the head of President William Ruto’s economic council.
Kenya signed a four-year, $3.6 billion financing deal with the IMF amid the Covid-19 pandemic in 2021. That program expires in April and both Kenya’s Treasury and an IMF head of mission in the country have confirmed that talks about a new one have begun.
But David Ndii, the chairman of the Ruto’s Council of Economic Advisors, said more aid would come with heavy costs and create uncertainty for Kenya.
“We would like to get out of an IMF program,” he said at a forum hosted by Nairobi-based bank NCBA Group. “We’ve turned the corner, the global financial shocks are receding, we’re beginning to grapple with our fiscal shocks.”
Authorities in the East African nation have tilted toward concessional borrowing in recent years as high global interest rates raised the cost of raising debt on international markets. Earlier this year, Kenya successfully refinanced a maturing $2 billion eurobond that some investors had expected it to default on — albeit at a relatively high 9.75% coupon.
“We’ve reached that fork of the road where we have to decide whether we get stuck in concessional financing, or whether we should go where middle-income countries are, which is the market,” Ndii said. “We’re a frontier market. Should we be looking to go to an emerging market and be subject to market discipline?”
He called for a paradigm shift within Kenya’s government and in its relationship with bilateral lenders, and for the country to improve its sovereign ratings and credit worthiness.
All three major ratings companies have downgraded their assessment of Kenya’s debt deeper into junk territory as it became apparent the government would fail to hit its revenue targets.
While Kenya’s prevailing IMF program requires it to step up tax collection, the government has had to walk back on its plans to introduce new levies after violent street protests.
“It was not the tax regime we would have chosen for ourselves,” Ndii said. “Having an IMF program compounds the problem because you’re trying to meet the structural benchmarks to enable the IMF to go to the board and disburse the next tranche” of funding,” which precipitated the crisis over the new tax measures, he said.
