The sighting of the new Treasury Cabinet Secretary John Mbadi with the Kenyan representative for the International Monetary Fund (IMF) on Wednesday has elicited strong reactions from Kenyans.
On Monday, the IMF Kenya Representative Selim Cakir paid a courtesy call to the Treasury boss, who replaced Professor Njuguna Ndung’u following radical cabinet changes occasioned by violent protests triggered by the unpopular taxes that were proposed in the Finance Bill 2024.
“The IMF Representative in Kenya, Mr Selim Cakir, @cakir paid a courtesy call to Treasury CS @CS_HonMbadi, @Kiptoock this morning. The IMF continues to play a crucial role in supporting Kenya’s economic stability and development,” Treasury said on its official X social media account.
But the event drew sharp reactions from Kenyans, both online and offline, with some, such as the Central Organisation of Trade Unions (Cotu), expressing their displeasure at the meeting.
“Historically, following IMF’s advice without scrutiny has led to adverse effects on the citizenry and workers. We draw important lessons from the former regime of President Hon. Mwai Kibaki, which approached IMF recommendations with a balanced perspective, ensuring that the welfare of the citizens remained a priority,” Cotu Secretary-General Francis Atwoli said in a press statement.
The IMF has been blamed for punitive taxes such as the 16 percent value-added tax (VAT) on fuel and the far-reaching austerity that has recently been implemented by the administration of President William Ruto.
The IMF has, however, distanced itself from the high cost of living experienced by Kenyans, noting that it only entered an agreement with Kenya to help it improve its foreign exchange balance and grow its economy which has been battered by several shocks including the Covid-19 pandemic, drought and the war in Ukraine.
During his vetting by Parliament’s Committee on Appointments, Mr Mbadi absolved the IMF of the blame, noting that the global lender does not invite itself.
“I want to be very clear on IMF…IMF will never invite themselves to a country, we do invite them and agree with them on a programme,” he said, noting that several shocks that Kenya experienced forced the government to invite the IMF.
Mr Mbadi takes over the finance docket amidst fears of a possible liquidity crunch should the IMF fail to disburse some $600 million (Sh77.3 billion).
The government had expected the IMF executive board to meet sometime in mid-July to approve the funding drawdown, but the withdrawal of the Finance Bill 2024 and subsequent revisions of the budget in the face of youth-led anti-tax protests have caused a delay in the approvals.
Following the rejection of the Finance Bill 2024, which had a deficit target of Sh703.9 billion, two global rating agencies downgraded Kenya’s rating citing difficulties in meeting its revenue targets after the rejection of the proposed taxes through which the Treasury targeted to collect an additional Sh346 billion.
Kenya has a multi-year financing agreement with the IMF under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements.
The agreement is said to help reduce Kenya’s debt vulnerabilities and promote sustainable growth by increasing tax collection and cutting non-essential spending by restructuring inefficient state corporations and curbing corruption and wastage.
To increase tax collections, the shelved Bill had proposed to introduce a 16 percent value-added tax (VAT) on bread, increase excise duty on mobile transactions fees, and introduce a motor vehicle circulation tax, all of which are contained in the arrangement Kenya has with the IMF.
