The International Monetary Fund (IMF) announced it has approved $606 million in loans to Kenya as the country tries to pay off its debts and increase taxes following widespread protests that resulted in the cancelling of financial reforms.
Despite being regarded as an economic bright spot in the troubled East African region, Kenya is facing approximately $80 billion in external and domestic debt. Interest payments consume two-thirds of its annual revenue, surpassing expenses for health and education.
An International Monetary Fund review was postponed due to protests that erupted in June in response to a financial bill intended to generate about $2 billion through various tax increases.
This unrest, which followed years of high inflation and corruption scandals, led to over 60 fatalities and ultimately resulted in President William Ruto scrapping the proposed bill.
“Kenya’s economy remains resilient, with growth above the regional average, inflation decelerating, and external inflows supporting the shilling and a buildup of external buffers despite a difficult
socio-economic environment,” said Gita Gopinath, IMF first deputy managing director, in a statement late Wednesday.
She mentioned that the revenue and exports had performed poorly, particularly after the finance bill was cancelled.
“A difficult adjustment path lies ahead,” said Gopinath. “Clearly communicating the necessity and benefits of the reforms is paramount.”
She mentioned that providing additional support for Kenyan banks and addressing governance and corruption challenges was crucial.
Earlier this month, Kenya sought an IMF governance audit to assess the effects of corruption and other issues on its financial situation—an initiative advocated by Western creditors to improve the nation’s image following the reputational damage caused by scandals and the harsh suppression of protesters.