Yatani hints at yet another Sh44b IMF loan this year
The National Treasury yesterday signaled that Kenya is in line to receive another $410 million (Sh44.1 billion) in funding to finance key priority areas in the next financial budget.
The Echequer said its first review under the 38-month International Monetary Fund (IMF) programme is expected to be successful, which will likely trigger the release.
“The outcome of the review is imminent and expected once the Executive Board of the IMF meets on June 23, (yesterday) to consider the report arising from the review,” said National Treasury Cabinet Secretary Ukur Yatani in a statement yesterday.
The loans are part of the conditional three-and-half year extended fund facility and extended credit facility agreed with the Bretton Wood institution to cushion the country.
Treasury says the IMF review of Kenya’s performance on fiscal and structural reforms was good.
In the fiscal reforms, Yatani said the primary balance target for end-March 2021 was achieved by a comfortable margin, alongside all targets related to debt guarantees as well as the Central Bank’s international reserves.
Yatani said the targets on tax revenue, social spending and outstanding exchequer requests were generally met, except by a marginal underperformance of 0.3 per cent of the Gross Domestic Product (GDP), primarily attributable to the Covid-19 pandemic effects.
On structural reforms, the CS said the efforts to increase transparency, reinvigorate anti-corruption measures and strengthen public accountability in procurement processes are bearing fruit with the publication of a comprehensive audit of Covid-19 related expenditures.
“The completion of the in-depth financial evaluation of 18 state owned enterprises (SOEs), with the largest fiscal risk was completed by the end of May, 2021, and will inform the reform of these enterprises so as to minimise risks emanating from them,” said Yatani.
Yatani said the Government will contain growth in spending while maintaining reasonable revenue-raising efforts in order to reduce debt related vulnerabilities while securing resources to support priority spending and overall growth.
He said the scaling up of the on-going vaccination program will be critical in managing risks to growth and securing economic recovery.
“These are all reflected in the budget submitted to Parliament for the financial year 2021/22, which is also consistent with the programmed deficit,” said Yatani.
As part of the conditionality, the government agreed to other belt-tightening measures like restructuring taxes and also some of its loss-making State-owned enterprises.
This also entails strengthening KPLC, one of the largest and most strategic state-owned enterprises, and this will check KPLC’s financial position by addressing the excess take-or-pay power purchase obligations, and ensuring cost-recovery in retail tariffs.
These reforms aim to neutralize fiscal risks emanating from this SOE, which has liabilities equivalent to 2.6 per cent of GDP, including Sh49.2 billion worth of government loans and guarantees.
Cash flow situation
Civil servants, including teachers became the first victims of the IMF programme which saw Kenya freeze a Sh82 billion payrises for all civil servants for two years, starting July following a deal agreed with IMF to keep pay unchanged until 2025.
Salaries and Remuneration Commission revealed the freeze, highlighting the gravity of the country’s rapidly deteriorating cash-flow situation that is marked by near-stagnant revenues and worsening debt service obligations.
It said the decision to suspend implementation of the third pay review cycle was made due to hard economic times caused by the Covid-19 pandemic.
The talk of new loan comes as two local organisations named Attorney General Kihara Kariuki and the EAC Secretary General Peter Mathuki as first and second respondents, respectively, in a case filed at the East African Court of Justice challenging Kenya’s appetite for IMF debts.
Peasants League Ltd Company and the Kenya Abolition Debt Network accuse the government of failing to observe the public debt ceiling as provided for in the EAC Monetary Union in its decision to borrow Sh255.9 billion in April.
