A standby facility with the International Monetary Fund expired yesterday. A replacement $1.5 billion precautionary facility is not yet in place.
There has been wild talk about imminent economic collapse if Eurobond holders demand immediate repayment. And the IMF is being demonised as an economic dictator.
Treasury Principal Secretary Kamau Thugge, a former IMF employee, says there is no immediate need for an IMF agreement and that positive talks with the IMF are ongoing. CBK governor Patrick Njoroge, a former IMF employee, says Kenya has almost six months of import cover.
The IMF is rightly worried that the Kenya government is not balancing its books. So it supported imposing 16 per cent VAT on fuel to reduce the deficit (the alternative being serious cuts). And it supported the removal of interest rate caps which make it hard for small businesses to borrow from commercial banks.
These are sensible government policies even if they are conditions for a renewed IMF facility. People should calm down. The IMF is not a monster and the economy is stable (even if it is under-performing).
Quote of the day: "The darkest places in hell are reserved for those who maintain their neutrality in times of moral crisis."
The Italian poet died on September 14, 1321.