We Are Following What’s Happening in Kenya - IMF

The International Monetary Fund (IMF) has announced that it is currently assessing recent developments in Kenya as part of reviewing whether the country is ready for more financing from the US-based institution. 

According to Julie Kozack, an IMF spokesperson, the ongoing reviews by the IMF will provide an opportunity to adjust its recommendations in favour of Kenya, particularly after the withdrawal of the Finance Bill of 2024 whose passage had been expected to unlock more IMF funding. 

"At every program review we do take the opportunity to assess developments and make adjustments considering the evolving circumstances, and that's exactly what we're doing in our active and constructive discussion with the Kenyan authorities," Kozack said in a scheduled press briefing.

This follows the recent protests that led to the government's withdrawal of the Finance Bill 2024, which included Ksh330 billion in tax increases.  The IMF's ongoing review of Kenya's recent developments is meant to determine the future of financial support under the current arrangements.

On Tuesday this week, the global rating agency, Moody’s, downgraded Kenya’s credit rating citing the country’s inability to impose strict economic policies due to the withdrawal of the finance bill 2024.

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The agency expressed concerns about the country's fiscal trajectory and increased borrowing needs following the government's decision to rely on spending cuts instead of tax increases.

“The downgrade of Kenya’s rating reflects significantly diminished capacity to implement revenue-based fiscal consolidation that would improve debt affordability and place debt on a downward trend, in particular, the government’s decision not to pursue planned tax increases and instead rely on expenditure cuts to reduce the fiscal deficit represents a significant policy shift with material implications for Kenya’s fiscal trajectory and financing needs.” Moody’s said in a statement.

This downgrade could make it more difficult and expensive for Kenya to borrow money in the international market.

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KRA Nets Ksh 43.9 Billion in Revenue from Tax Amnesty Program

In other news, the Kenya Revenue Authority (KRA) has announced the successful collection of Ksh43.9 billion through its recent tax amnesty program.

This initiative aimed to increase tax compliance and boost national revenue by allowing taxpayers to declare previously undisclosed income without facing penalties or legal consequences.

2.6 million taxpayers were granted amnesty for the financial year 2023/24 and KRA had a target of Ksh50 billion.

By participating in the program, taxpayers could avoid the penalties and interest charges that are typically associated with unpaid taxes. The amnesty period offered a limited window for taxpayers to regularise their tax affairs voluntarily.

This program encouraged more taxpayers to enter the formal tax system. The additional revenue generated will support various government projects and services, contributing to the country’s overall economic development.

Read Also: KRA’s Statement on Revenues Collected in Year Ended June 30 2024