TOUGH TERMS
…IMF slaps tough terms on Kenyan loan offer
NAIROBI - The government is in urgent need of cash for its annual budget support and will therefore have to implement tough conditions imposed by international lending institutions, Treasury Permanent Secretary Julius Muia has said.
Dr Muia, in an interview at the weekend, said Kenya is seeking a quick-disburse loan from the International Monetary Fund (IMF) to top up the public purse, which has taken a battering from the Covid-19 pandemic.
The IMF on Friday released a statement disclosing that tax, governance and monetary policy reforms are part of its ongoing debt negotiations with the government, stoking fears of a return to painful prescriptions of the past that have resulted in civil servant job losses and increased taxes.
“The reforms that are tied to IMF programmes are not exotic, they are formulated between the country and IMF. Kenya is negotiating a disbursing programme and discussions are still on going with IMF,” said Dr Muia told the Nation without disclosing the amount that Treasury has applied for.
He said Kenya needs the reforms suggested in the IMF loan package, but added that the conditions will not necessarily mean civil servant
job cuts.
“A programme with the IMF is desirable for developing countries because it enables them to carry out ... reforms while benefiting from ... technical and financial support,” said Dr Muia.
The IMF, in its letter, pointed to the need for structural and governance reform for State Owned Enterprises.
“The outcome of these reforms in terms of staffing/ jobs is not a predetermined variable,” said Dr Muia. Kenya received a Sh78.4 billion ($739 million) loan from the IMF in March to help cushion the economy from the adverse effects of the Covid-19 pandemic.
The IMF says its stringent conditions would help stabilise the economy. IMF officials held online talks with Treasury Cabinet Secretary Ukur Yatani, Central Bank of Kenya Governor Patrick Njoroge, Head of Public Service Joseph Kinyua, and other senior government officials ahead of the Friday statement.
Should Kenya accept the conditions, it could get a loan as soon as early next year, said the IMF. On Sunday, economists warned that the conditions could usher in a fresh round of job cuts in the public service and tax hikes; similar to what happened with the IMF’s Structural Adjustment Programmes of the 1980s.
Yatani had not responded to queries by the Nation by press time about the economists’ warnings of the increased role that the IMF is playing in Kenya’s economic management.