Don’t Lend Our Government, Debt-Weary Kenyans Demand of IMF

NAIROBI (Capital Markets in Africa) — The International Monetary Fund has walked into a storm of social-media criticism after approving a $2.34 billion three-year financing package for Kenya.

Some citizens in East Africa’s biggest economy don’t want any more loans for their government, saying a lot of the cash will be embezzled by state officials, and are signing online petitions to the Washington-based lender.

“Previous loans to the Kenya government have not been prudently utilized and have often resulted in mega-corruption scandals,” according to one petition created on April 4 that had about 232,000 signatures by Friday morning. “The IMF can and should do the right thing: withhold the funds until the next, hopefully more accountable, government is elected into office next year.”

Several petitioners referred to remarks earlier this year by President Uhuru Kenyatta that as much as 2 billion shillings ($18.6 million) is stolen from government coffers daily, as reported in local media.

The negative publicity will be a concern for the IMF, according to Churchill Ogutu, head of research at Nairobi-based Genghis Capital Ltd.

“The timing could not have been worse with IMF and World Bank spring meetings this week and all the comments on the Fund’s socials are from Kenyans,” he said by phone. “I doubt the IMF debt can be called back, which is the main aim of the campaign, but it could ultimately lead to greater transparency from the government in terms of debt accumulation.”

The IMF said in a statement this week some austerity will be required of Kenya, where public debt is expected to peak at 73% of gross domestic product in 2022-23. The program will advance structural reform and governance and strengthen transparency and accountability through the anti-corruption framework, according to the lender.

The facilities and additional financing from both concessional sources and capital market, coupled with suspension of debt service, will help meet Kenya’s “significant” medium-term needs, the IMF said on its website in response to questions on the new program. “The alternative to this financing is much sharper fiscal consolidation or much more expensive borrowing on commercial terms,” it said.

The IMF program is a structural-adjustment loan, which will come with some pain, according economist David Ndii, a critic of Kenyatta’s government.

Government spokesman Cyrus Oguna declined to comment on the allegations in the petitions and referred Bloomberg to an April 7 National Treasury statement that said an interest-free IMF loan at the start of the pandemic tided the nation over.

“It comes with austerity — tax raises, spending cuts, downsizing — to keep Kenya credit-worthy so that we continue borrowing and servicing debt,” he said on Twitter. “IMF is not here for fun.

Source: Bloomberg Business News