Kenya president spoke to IMF chief after pulling tax hikes, sources say
Adds additional comment from source in paragraph 7, analyst quotes in paragraphs 13-14
By Aaron Ross
NAIROBI, July 4 (Reuters) -Kenyan President William Ruto spoke by phone with International Monetary Fund chief Kristalina Georgieva in the days after he withdrew $2.7 billion in proposed tax hikes in response to deadly protests, two diplomatic sources told Reuters.
The finance bill containing the tax increases was central to policy reforms agreed by Kenya with the IMF as part of a lending programme worth $3.6 billion.
Analysts say its withdrawal a week ago is likely to result in Kenya missing key programme targets, although the government does not urgently need cash from the IMF after it was able this year to repay a bond that was originally worth $2 billion by issuing a new seven-year bond.
The IMF has been a major target of the ire of young Kenyan protesters, who have accused it of being the driving force behind the proposed tax hikes.
The two sources, who spoke on condition of anonymity, did not provide details about Ruto and Georgieva's phone call.
However, they said there was agreement among major donors that the IMF needed to show flexibility on programme targets as Kenya looked to fill the gap caused by the bill's withdrawal.
One of the sources added that the government should show a commitment to reducing wasteful spending, cracking down on corruption and increasing accountability in exchange for that flexibility.
The IMF reached a staff level agreement with Kenya in early June on a policy package needed to complete the lending programme's seventh review, expected to unlock a disbursement of several hundred million dollars, but the deal has not yet received approval from the fund's Executive Board.
"We remain deeply concerned by the recent tragic events in Kenya and maintain close ongoing and constructive dialogue with the Kenyan authorities," an IMF spokesperson said when asked about the call.
Ruto's spokesperson did not respond to requests for comment.
Since shelving the bill, Ruto has pledged to include austerity measures in a supplemental budget, but has also suggested that the government will need to significantly increase borrowing in the 2024/25 fiscal year.
An IMF spokesperson said last week that its main goal has been helping Kenya overcome its economic challenges and improving its people's well-being.
"I think the IMF will continue helping Kenya, but the disbursements are more likely to resume toward the end of this year," said Pavel Mamai, managing partner and portfolio manager at Promeritum Investment Management.
"The IMF will basically ask Kenya to regroup and present a new reform plan."
At least 39 people have been killed in the protests since mid-June, according to a government-funded human rights organisation. Anti-government demonstrations have continued since Ruto pulled the bill, although with lower turnout.
Additional reporting by Karin Strohecker and Libby George in London; Editing by Alexander Smith
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
