The International Monetary Fund has introduced a set of new conditions for Kenya to access its $1.5 billion precautionary loan that was suspended in September last year, barely weeks after the country scrapped control of interest rates in compliance with the international lender’s demands.
The IMF team wants the Treasury to cut the rising budget deficit which stood at 7.7 per cent of GDP in the 2018/2019 financial year.
The fund also wants the government to implement “tax and expenditure reforms that do not hurt private sector investments and stifle economic growth,” before the resumption of talks planned for early next year.
The new conditions are set to throw a spanner in the government’s plans to access funding from the IMF, including the critical precautionary loan to cushion the shilling from external economic shocks.
“Progress in this direction (reduction of fiscal deficit), including the design of tax and expenditure reforms that support a growth-friendly fiscal consolidation, would be important to anchor a new Fund-supported programme,” the IMF said in a statement.