For Ms Antoinette Sayeh, the deputy managing director and acting chair of the IMF, the Fund is helping the East African nation by “providing an essential policy anchor to debt sustainability and public confidence.”
However, the country’s own efforts with tax collection are helping, she says: “Strong fiscal performance is providing a welcome resilience. Although the authorities are adjusting domestic fuel prices to international levels more gradually, program targets are still being met thanks to strong tax revenues.”
Tax collections for the 2021-2 fiscal year, were strong, according to the IMF, creating the monetary space to cushion, at least temporarily, part of the higher fuel and food costs that have hit households.
A statement from the IMF explains: “The approved fiscal year 2022/23 budget broadens tax collection and maintains careful expenditure control while protecting social spending.”
IMF’s total disbursements to Kenya so far have reached $1.21bn. The total amount available to Kenya form the IMF is $2.34 billion available under a 38-month program approved in April 2021.
Where does Kenya’s economy stand post-Covid
According to the IMF: “Kenya’s economy has rebounded strongly in a challenging environment and is projected to grow 5.7% in 2022. Downside risks predominate in the near term. Uncertainties stem from the war in Ukraine, continuing drought in the semi-arid regions, unsettled global financial market conditions and the political calendar.”
Between 2015 and 2019, Kenya’s economic growth averaged 4.7% per year. The arrival of Covid-19 in 2020 disrupted this trajectory and the economy contracted by 0.3%.
However, in a post-Covid world, despite the various current obstacles, recovery continues. The IMF advises the National Treasury to sustain fiscal consolidation efforts through efficient spending and additional tax measures to reduce debt vulnerabilities and release funds needed for social and development spending.
Kenya is also trying to structurally reform, particularly focussing on improving governance. Despite delays, the following advancements are underway:
- The oversight of state-owned enterprises is being reinforced with new tender documents that will make publishing beneficial ownership information of successful bidders for public procurements easier;
- An ongoing audit of Covid-19 vaccine spending will improve transparency and allow for follow-up by stakeholders.
The economy is a key policy debate in the upcoming August 2022 election, with candidates making various promises such as stipends to poor families, access to cheaper credit, land reform, unorthodox exports, farm subsidies, and more.
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