MAJOR shareholders at the IMF are encouraging Kenya to request an official assessment of its corruption and governance issues to unlock $600 million in stalled funding, according to two diplomatic sources. The delay in disbursement is due to the shelving of proposed tax hikes earlier this year amid public protests.
In June, Kenya withdrew $2.7bn worth of planned tax increases following widespread protests, during which over 50 people lost their lives. The protests highlighted dissatisfaction with corruption and poor governance, as young Kenyans voiced anger over taxes funding politicians’ extravagant lifestyles.
Diplomatic sources revealed that several Western governments have been pushing for an IMF ‘governance diagnostic’ assessment of Kenya’s vulnerabilities related to corruption and governance. Such a diagnostic must be requested by the country itself, and one source indicated that making this request would help further discussions for additional IMF support.
The Kenyan finance ministry has not responded to requests for comment, while IMF spokespeople have also yet to comment on the issue.
Governance diagnostics are not new to the IMF, with 14 countries including Ukraine, Cameroon, and Sri Lanka having undergone such assessments since 2014. The diagnostic is aimed at identifying governance shortcomings and offering recommendations to tackle corruption and improve governance practices.
Following the withdrawal of the proposed tax hikes, Kenyan authorities are now exploring alternative ways to increase revenue. Finance Minister John Mbadi mentioned in August that some measures from the scrapped tax bill might be reinstated. However, last month he also stated he would seek public input on new legislative initiatives to boost revenue.
Diplomatic sources emphasised that the Kenyan government must present a credible plan to reduce its fiscal deficit before the IMF will consider new disbursements. The push for an assessment highlights the importance of good governance in securing international financial support and stabilising Kenya’s economy.
