What you need to know:
- Under the 38-month arrangement, Kenya will borrow $2.34 billion to address debt vulnerabilities, response to Covid-19 and enhancing governance.
- Among the actions taken by the government in line with its deal with the IMF are a two-year freeze on pay increases for civil servants.
The International Monetary Fund (IMF) has released Sh43.8 billion to Kenya, even as it acknowledged concerns among Kenyans that spending on Covid-19 procurements was riddled with corruption.
The lender’s executive board made the decision after assessing the government’s fiscal reforms regarding widening the tax base, measures to reduce debt vulnerabilities and the state of social spending, among other factors.
“The Board’s decision allows for an aggregate immediate disbursement of $407 million …, bringing Kenya’s total disbursements for budget support under the arrangements to about $714.5 million,” IMF said in a statement Thursday.
Under the 38-month arrangement, Kenya will borrow a total of $2.34 billion to address debt vulnerabilities, supporting response to Covid-19 and enhancing governance.
IMF addressed recently published Covid-19 audits that unearthed glaring corruption syndicates in the Kenya Medical Supplies Authority (Kemsa) and some county governments.
It said that though the audits had identified procurement violations, they had formed an important step in strengthening fiscal transparency and accountability in government.
“The Covid-19 funds audits identified violations of the Procurement Act and the Public Finance Management Act by the Ministry of Health, Kemsa and referral hospitals,” it said.
“Having this information in the public domain should support effective follow-up by the appropriate institutions in Kenya. This should include addressing shortcomings in control and oversight, as well as actions to further investigate and sanction administrative and criminal violations.”
One of the programme’s goals is adopting measures to promote greater transparency in public accounts and strengthening the anticorruption framework.
Speaking at the conclusion of the executive board’s meeting, IMF’s deputy managing director and acting chair, Antoinette Sayeh, pressured the government to follow up on the audits.
She noted that their publication, together with a recent requirement for companies awarded public tenders to disclose beneficial ownership information, would strengthen fiscal transparency and accountability in the use of public resources.
“Going forward, effective follow-up by the appropriate institutions on the findings of the audits will be essential,” she said.
Justifying the disbursement, Ms Sayeh said Kenya had demonstrated strong commitment to its fiscal reform agenda, indicating that the government’s programme would reduce debt vulnerabilities.
Among the actions taken by the government in line with its deal with the IMF are a two-year freeze on pay increases for civil servants and tax hikes, including on basic commodities.
“Looking ahead, the authorities should sustain their consolidation efforts by continuing to improve spending efficiency and undertaking further revenue administration and tax policy measures. Maintaining momentum on the structural reform agenda is important,” Ms Sayeh added.
The IMF argues that by consuming 22 per cent of the government’s total current spending and more than a third of tax revenues, the public sector wage bill must be contained.
“While these are challenging policy choices, the alternative to containing public sector wage growth is lower room for social and development spending or further accumulation of public debt,” the lender said.
The release of the Sh43 billion brings to Sh77 billion ($714.5 million) the total IMF disbursements for budget support under the arrangement.
IMF, however, noted that until Covid-19 vaccinations are widely available, pandemic-related pressures would persist.