Global Advisory Firm Calls Kenya’s move to allow lapse of IMF Facility as ‘Short Term Thinking’
Kenya’s Finance Minister Henry Rotich says the country doesn’t need IMF Facility
Kenya’s $ 1.5 Billion precautionary facility with the International Monetary Fund (IMF) expired last week, which saw the Kenyan currency take a dip against the US dollar and rattle investors at the Nairobi Securities Exchange (NSE).
According to Teneo, a global advisory firm that works exclusively with the CEOs and leaders, ‘’the lapse of the program is evidence of the government’s short-term thinking and a clear blow to the sovereign’s credibility amid growing concerns over Kenya’s fast-growing debt burden.’’
The report also highlights the perceived standoff between the government, the cabinet secretary for finance, Henry Rotich and parliament which has consistently refused to budge on a reversal of the controversial 2016 interest rate caps and the introduction of a 16 per cent value-added tax (VAT) on fuel products which president Kenyattaproposed to slash by 50 per cent to 8 per cent, were central to the continuation of the IMF program.
The report also notes that the government’s inability to push the legislation through parliament clearly increased the risk that the IMF program would expire without a new deal in place.
‘’The president still needs to decide how to deal with the finance bill. If he assents to the bill, it will be a further sign that the government is failing to prioritize fiscal prudence and bolster the economy by revoking the interest rate cap, which has failed to deliver a hoped-for stimulus to private-sector lending.’’ The report reads.