The International Monetary Fund (IMF) has postponed the date of a new funding agreement for Kenya due to lack of consensus on new revenue targets following the withdrawal of the 2024 Finance Bill.
The fund is expected to approve the payment of at least Sh77.5 billion ($600 million) in a multi-year loan program with Kenya this month, but the lender has not set a date for the approval.
The withdrawal of the 2024 Finance Bill, together with previously missed tax targets, has forced the Kenyan authorities and Washington DC-based institutions to enter into new discussions aimed at setting new revenue targets as part of the loan terms.
“Discussions are ongoing to establish policies and reforms that can support the completion of the review in the program. There is no confirmed date for the council’s deliberations. We will inform you of the date and related information,” said the IMF Everyday Business in response to Friday’s email.
The IMF Executive Board’s provisional calendar, updated to September 27 and listing the Board’s official meetings and seminars, excludes Kenya.
The IMF conducted a new staff visit from September 11 to 16 and held discussions with the Kenyan authorities on new developments and policies to address emerging challenges.
The recent staff visit further wraps up the seventh review of Kenya’s multi-year program with the IMF, which was originally due to conclude in July.
“We remain committed to supporting the authorities in their efforts to identify a set of policies that can support the completion of the review in the programs implemented as soon as possible. The authorities expressed their commitment to promote economic and governance reforms that are essential to foster sustainable and inclusive growth that benefits all Kenyans. We will continuing discussions with the authorities,” said the IMF’s Head of Mission to Kenya Haimanot Teferra in a statement on Tuesday.
The Central Bank of Kenya (CBK) said Kenya expects payments of about Sh181 billion ($1.4 billion) for the remainder of the programme, which runs until April 2025.
CBK Governor Kamau Thugge said last month that he expected a council meeting “soon” to ratify the next disbursement of about Sh77.5 billion ($600 million) with Kenya having met most of the quantitative performance criteria in the program, including international reserves but was flagged. in the discourse around setting revenue targets.
“The quantitative performance criteria that are problematic are on the revenue side. We missed the target in December (2023) and June (2024). The target, I think, is too high, but we have achieved sufficient revenue performance,” he said on August 7.
The withdrawal of the Finance Bill, 2024, which denied the government about Sh344.3 billion in additional revenue, reduced the expected performance of resource mobilization in the 2024/25 financial year.
The Kenyan authorities and the IMF were forced to review the targets to anchor future payments.
Thus, the ninth and final review of the current program in March next year will be based on the fiscal targets (main balance and tax revenue) agreed by both parties and covering the period from July 1, 2024 to December 31, 2024.
Revenue performance has been very poor even excluding the Finance Bill, Finance Bill 2024, with total taxes in the fiscal year ending June 2024 missing the mark of Sh204.9 billion and shortfalls recorded in broad categories including income tax, customs duties and value added tax (VAT).
The IMF’s executive board approved a Sh465.4 billion ($3.6 billion) program for Kenya in April 2021 with the main objective of enabling the country to make a strong post-pandemic recovery.
The program has undergone several adjustments, including the addition of a Sh71.2 billion ($551.4 million) 20-month Resilience and Sustainability Facility (RCF) in July last year.
The National Treasury acknowledged discussions were underway to finalize the seventh review of the program last week.
“The program has successfully gone through six reviews and the first review on the RSF was approved by the IMF executive board on January 17, 2024. Discussions to conclude the 7th review are underway,” the couple said in a presentation.
