The International Monetary Fund (IMF) has further delayed the approval date for new funding to Kenya due to a lack of consensus on new revenue targets following the withdrawal of the 2024 Finance Bill.
The Fund had been widely expected to approve the disbursement of at least Sh77.5 billion ($600 million) under its multi-year loan programme with Kenya this month, but the lender has yet to set a date for the approval.
The withdrawal of the 2024 Finance Bill, along with earlier missed tax targets, has forced Kenyan authorities and the Washington DC-based institution to enter fresh talks aimed at setting new revenue targets as part of the loan's conditions.
“Discussions are ongoing to firm up on policies and reforms that could support completion of reviews under the programme. No date has been confirmed for the board’s deliberation. We will communicate the date and related information in due course,” the IMF told Business Daily in an emailed response on Wednesday.
The IMF Executive Board's provisional calendar, updated to September 27 and listing formal meetings and seminars of the Board, does not include Kenya.
The IMF conducted a new staff visit from September 11 to 16 and held discussions with the Kenyan authorities on recent developments and policies to address emerging challenges.
The new staff visit further extended the completion of the seventh review of Kenya's multi-year programme with the IMF, which was originally expected to be completed in July.
“We remain fully committed to supporting the authorities on their efforts to identify a set of policies that could support the completion of the reviews under the ongoing programme as soon as feasible. The authorities expressed commitment to advancing economic and governance reforms which are crucial for fostering sustainable and inclusive growth that benefits all Kenyans. We will continue our discussions with the authorities,” IMF’s Mission Chief to Kenya Haimanot Teferra said in a statement on Tuesday.
The Central Bank of Kenya (CBK) says Kenya expects disbursements of about Sh181 billion ($1.4 billion) for the remainder of the programme, which runs until April 2025.
CBK Governor Kamau Thugge said last month that he expected a board meeting "soon" to ratify the next disbursement of roughly Sh77.5 billion ($600 million) with Kenya having met most of the quantitative performance criteria under the programme, including international reserves but hinted at discourse around set revenue targets.
“The problematic quantitative performance criteria have been on the revenue side. We missed the target in December (2023) and June (2024). The targets, I think, were very high, but we have managed to have a reasonable revenue performance,” he said on August 7.
The withdrawal of the Finance Bill, 2024, which denied the government an estimated Sh344.3 billion in additional revenue, dampened the expected performance for resource mobilisation in the 2024/25 financial year.
The Kenyan authorities and the IMF were forced to review targets to anchor future disbursements.
Thus, the ninth and final review of the current programme in March next year will be based on fiscal targets (primary balance and tax revenue) agreed upon by the two parties and covering the period July 1, 2024 to December 31, 2024.
The performance of revenues has been underwhelming even with the exclusion of the Finance Bill, 2024 Finance Bill, with total taxes in the fiscal year ended June 2024 missing the mark by Sh204.9 billion and with shortfalls being recorded across broad categories including income tax, excise duty and value added tax (VAT).
The executive board of the IMF approved the Sh465.4 billion ($3.6 billion) programme for Kenya in April 2021 with the main objective of enabling the country to secure a strong post-pandemic recovery.
The programme has undergone multiple adjustments, including the addition of a 20-month Sh71.2 billion ($551.4 million) Resilience and Sustainability Facility (RCF) in July last year.
The National Treasury acknowledged ongoing discussions to complete the seventh review of the programme last week.
“The programme has successfully gone through six reviews and the first review under the RSF was approved by the IMF executive board on January 17, 2024. Discussions to conclude the 7th review are ongoing,” the exchequer said in a presentation.
