Kenya’s economy is grappling with dire circumstances, characterized by unsustainable borrowing, surging debt servicing costs, and limited revenue generation. Despite mounting criticism and protests over the country’s escalating debt, the International Monetary Fund (IMF) continues to approve loans, causing a loss of faith in the government.
In the wake of a global economic downturn and rising inflation, Kenya, like many other African nations, is facing a challenging economic landscape, resulting in dwindling revenues. To make matters worse, the country’s borrowing has increased while it struggles to generate sufficient revenue. Citizens are protesting against the rising living costs, and the government is finding it increasingly difficult to pay salaries.
In an effort to address the ongoing economic crisis and combat climate change, the IMF has recently approved the disbursement of a $1 billion loan to Kenya. However, the substantial increase in Kenya’s external debt, from $10.2 billion to $34.8 billion between 2013 and 2020, has raised concerns among critics regarding the justification of further financial assistance to a debt-stricken nation.
Recognizing the seriousness of Kenya’s debt situation, the IMF has recommended various measures to tackle the issue. These include cutting tax leakage and subsidies to decrease the fiscal deficit, advocating for debt reduction, and encouraging the government to rely more on internal funding for its budget. However, many Kenyans remain skeptical about the impact of these measures, given the country’s struggles to meet its debt obligations.
The Kenyan government defends the IMF loans, asserting that financial assistance is necessary to bridge the budget gap and support essential projects, ultimately benefiting citizens. However, this argument has not alleviated concerns, as some believe that the IMF’s involvement has led to higher taxes for ordinary citizens, resulting in reduced income due to increased taxation.
While pursuing enhanced revenue mobilization makes sense in achieving long-term economic stability, implementing such measures amid harsh economic conditions has proven challenging. Consequently, dissatisfaction among Kenyans towards both the IMF and the government’s ability to mitigate the harsh economic realities has grown.
President William Ruto and his Kenya Kwanza team had promised to be cautious about international loans, but Kenya has veered off course, accumulating KES 1.2 trillion in debt over the past eight months. This further burdens citizens, as they are likely to bear the cost of these loans.
The situation has left Kenya in a difficult predicament. With the debt crisis looming large, the country finds itself in a position where IMF loans are necessary to fund critical programs, as internal revenue falls short of meeting financial obligations. While the IMF’s involvement and the attached stringent conditions aim to promote a more economically sustainable climate, concerns persist about the short-term impact on the debt crisis. These IMF loans are crucial to addressing the fiscal gap and supporting the country’s economic initiatives, despite facing criticism and protests.