- The Board’s decision allows for the immediate disbursement of Sh100.5 billion under the EFF/ECF arrangements.
- The decision also allows for an immediate disbursement of Sh9.7 billion under the Resilience and Sustainability Facility (RSF) arrangement.
Image: PCS
Kenya's tax drive is unlikely to ease soon after the International Monetary Fund raised concern over the country’s revenue shortfall.
The concern comes at a time the country is set to receive yet another loan disbursement from the lender, worth Sh110 billion.
The approval comes after IMF's executive board increased Kenya's Special Drawing Rights access by $941.2 million (Sh151.5 billion), upon completion of the sixth review of the country’s funding programme on Wednesday.
It is the third and largest augmentation of the ongoing programme under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF).
The board’s decision allows for the immediate disbursement of $624.5 million (Sh100.5 billion) under the EFF/ECF arrangements, which includes an augmentation of access of $310.6 million (Sh50 billion).
“This brings total disbursements to Kenya under the EFF/ECF arrangements to $2.6 billion (Sh418.6 billion),” the lender said in a statement.
“The decision also allows for an immediate disbursement of $60.2 million (Sh9.7 billion) under the Resilience and Sustainability Facility (RSF) arrangement.”
The move to augment the country’s SDR access points towards fiscal consolidation measures, according to the lender.
SDR refers to an international reserve asset created by the IMF to supplement the official reserves of its member countries.
It not being a currency, it is a potential claim on the freely usable currencies of IMF members, also intended to provide a country with liquidity.
In completing the reviews, the board also approved modification of program conditions, waivers of non-observance of the continuous performance criterion, no new accumulation of external arrears, and the end-June 2023 and end-December 2023 tax revenue targets.
It considered the corrective actions taken by the government, and waiver of applicability for all other end-December 2023 performance criteria.
It has granted Kenya a waiver for missing the December 2023 tax revenue target as per the programme target.
Directors expressed concern over the shortfalls in tax revenue collection, for instance the Q1 2023/24 target that was missed by Sh79 billion.
They called for urgent implementation of corrective measures, including timely adoption of measures in the Medium-Term Revenue Strategy 2024/25 – 2026/27.
They expressed satisfaction with the recent monetary policy tightening to contain inflation and safeguard external sustainability, saying actions towards greater exchange rate flexibility are important.
“We further call for continued institutional and technical reforms targeted at improving the functioning, deepening, and transparency of the FX market,” the directors noted.
Antoinette Sayeh, the deputy managing director and acting chair, said the authorities’ commitment to fiscal consolidation while protecting essential social and developmental spending should support efforts to bring down the debt burden toward the new debt anchor of 55 per cent of GDP in present value terms by 2029.
Recent fundings from the IMF have triggered public outrage on account of rising taxes in the country for purposes of debt servicing and further, preventing the state from opting expensive external loans.
IMF however says Kenya’s growth has remained resilient in the face of increasing external and domestic challenges with the help of the EFF/ECF and RSF arrangements.
“These funds continue to support the authorities’ efforts to sustain macroeconomic stability, strengthen policy frameworks, withstand external shocks, push forward key reforms, and promote more inclusive and green growth,” it said.