Western Nations Encourage Kenya to Pursue IMF Review of Corruption Issues, Sources Report

By Aaron Ross

NAIROBI (Reuters) – Key stakeholders at the International Monetary Fund are urging Kenya to seek an IMF evaluation of corruption and governance challenges. This is part of efforts to resume lending, which has been stalled due to the cancellation of planned tax increases, according to two diplomatic sources.

Approximately $600 million in disbursements tied to an IMF plan that is set to expire next year has been on hold since the Kenyan government retracted $2.7 billion in tax hikes in June, a decision made in response to widespread protests.

The unrest, which resulted in over 50 fatalities, highlighted significant concerns regarding corruption and misgovernance. Young demonstrators expressed frustration that their taxes were funding the extravagant lifestyles of politicians.

Western governments have been advocating for a governance diagnostic evaluation, or IMF assessment, to address corruption and governance issues, the sources revealed. They requested anonymity to discuss sensitive conversations.

For such a governance diagnostic to take place, Kenya must formally ask for it. One source noted that making this request would help pave the way for discussions about further IMF assistance.

The Kenyan finance ministry did not reply to inquiries for comment, and representatives from the IMF in Washington did not immediately respond either.

Since 2014, the IMF has released governance diagnostic reports for 14 countries, including Ukraine, Cameroon, and Sri Lanka, with additional assessments currently in progress.

Following the withdrawal of tax hikes, Kenyan authorities are seeking new measures to raise revenue.

Finance Minister John Mbadi indicated in August that the government would need to reintroduce some aspects of the scrapped legislation. However, last month, he stated he would be soliciting public input on new proposals to enhance revenue.

Diplomatic sources have mentioned that the government will need to present a solid plan to reduce its fiscal deficit before the IMF will contemplate additional disbursements.