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ANALYSIS: Experts Say Withdrawal Of Finance Bill Won’t End Kenya’s Woes

THE recent withdrawal of Kenya’s Finance Bill 2024, which proposed significant tax hikes, has momentarily quelled public unrest but has not addressed the underlying financial issues facing the government. According to financial experts, the bill was a crucial part of Kenya’s agreement with the IMF aimed at tackling the country’s fiscal challenges.

President William Ruto’s plan, endorsed by the IMF, aimed to generate over $2.7bn in revenue to fund the government’s ambitious KSh 4.2 trillion ($30.6bn) budget for 2024-25. Despite anticipating public protests, the IMF advised the government to proceed with the Finance Bill as part of a broader strategy to meet stringent conditions under its multi-year program with Kenya. These conditions include a series of tax reforms to enhance revenue collection.

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The implementation of the bill led to severe public backlash, resulting in the deaths of more than 20 Kenyans and dozens more injured. Financial expert Robert Gitachu emphasised that the turmoil reflects broader systemic issues. ‘What we are seeing right now is the product of a bigger picture. The ultimate goal of the IMF is to ensure that the debt we incur is repaid,’ Gitachu told Anadolu Agency.

The cost of financial policies

The tragic consequences of the Finance Bill have raised critical questions about the human cost of financial policies. Faith Kamau, a financial analyst at Jomo Kenyatta University, expressed concerns over the IMF’s advice. ‘No international organisation should tolerate or promote loss of lives for profit. There is a delicate balance between fiscal responsibility and social stability, and the Kenyan government must find solutions that do not endanger its citizens’ welfare,’ she told Anadolu.

Kamau stressed that while fiscal responsibility is crucial, it should not come at the expense of citizens’ well-being. She urged the government to explore alternative measures to ensure economic stability without compromising the safety and lives of Kenyans.

Despite the withdrawal of the Finance Bill, Kenya’s financial problems persist. The IMF’s Director of Communications, Julie Kozack, stated that the organisation is closely monitoring the situation. ‘Our main goal in supporting Kenya is to help it overcome its economic challenges and improve the well-being of its people,’ Kozack said.

However, Kamau criticised this statement, arguing it showed a lack of understanding of the real suffering experienced by Kenyans. ‘It’s clear that someone doesn’t care about human life when economic policies result in the deaths of innocent people. The IMF’s goals, while well-intentioned, seem disconnected from the harsh realities on the ground,’ Kamau remarked.

Public outcry and local sentiments

The withdrawal of the Finance Bill has sparked widespread public outcry. Joseph Mburu Mwangi, a taxi driver in Nairobi, expressed his frustration: ‘The IMF doesn’t understand our struggles. They are pushing for policies that make our lives harder. President Ruto should listen to us, not to foreign institutions that don’t care about our daily challenges.’

Grace Nyambura Njeri, a 24-year-old shop assistant, shared similar sentiments. ‘It’s unfair for the IMF to pressure our government into making decisions that hurt the common people. We are already struggling to make ends meet. This Finance Bill was only going to make things worse for us,’ she said.

IMF’s ongoing role and future prospects

The IMF is set to conduct a seventh review of its multi-year programme with Kenya, which includes new tax measures as part of the conditions. Upon completing the review, if approved by the IMF’s Executive Board, Kenya will have access to additional funds under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements. This would adjust the total remaining access to about $976 million, including zero-interest concessional resources. The overall IMF financial commitment to Kenya during the EFF/ECF programme will reach approximately $3.60bn. Additionally, the completion of the second review under the Resilience and Sustainability Facility (RSF) will unlock an extra $120 million.

Haimanot Teferra, leading the IMF team, urged the Kenyan government to raise funds by enhancing tax compliance and increasing expenditure efficiency. ‘Public expenditure and wage bill reforms, state-owned enterprise restructuring, rationalising unproductive current spending, and better targeting of subsidies and transfers while ring-fencing social and development spending will be key to enhancing the credibility of the consolidation strategy in FY 2024/25 and the medium term,’ Teferra stated.

Kamau responded to the review and conditions with cautious optimism. ‘While the additional funds from the IMF could provide some relief, the government’s challenge is to implement these conditions without causing further public unrest. Balancing fiscal responsibility with social stability will be crucial in the coming months,’ she said.

Heightened security and continued unrest

In the wake of the widespread unrest sparked by the Finance Bill 2024, there has been heightened security across Kenya. The protests led to looting and property damage throughout the capital. President Ruto, bowing to public pressure, announced he would not sign the controversial bill.

Military vehicles and armoured personnel carriers have been patrolling Nairobi, with heavily armed soldiers assisting the police in preventing further chaos, looting, and vandalism.

The withdrawal of Kenya’s Finance Bill 2024 underscores the complex interplay between fiscal policies and social stability. While the IMF-supported tax reforms aim to address Kenya’s financial challenges, the human cost of these policies cannot be ignored. The Kenyan government faces the daunting task of balancing economic stability with the welfare of its citizens, a challenge that will require careful consideration and innovative solutions in the months ahead.

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