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Opposition kicks as Kenya raises fuel VAT from 8% to 16%

Published

1 year ago

June 26, 2023

The Kenyan presidency announced on Monday the launch of a finance bill that will see an increase in tax payments in the country.

The bill will begin an increase in VAT on fuel from 8% to 16%, and a payroll levy to finance a low-cost housing programme initially set at 3% was reduced to 1.5%.

Kenya is grappling with some financial issues as its national debt has increased to a high of 65 billion dollars, or 67% of GDP, and the cost of repayment is rising as the value of the Kenyan shilling declines.

Prior to the announcement on Monday, the administration had given hints about raising taxes in response to pressure to generate more income. Notwithstanding a cash shortage that has prevented the payment of civil service salaries, it has also insisted that it will not skip out on its debt repayment responsibilities.

Meanwhile, the new tax regime and revenue drive of the government have drawn criticism from the opposition. The opposition coalition, Azimio, led by Raila Odinga, accused President William Ruto of reneging on his election promises to improve living conditions for Kenyans.

Odinga’s spokesman, Dennis Onyango told journalists on Monday that their “position remains that the Bill is a mistake and an experiment Kenyans can ill afford.”

For creditors like the International Monetary Fund, the financial reforms are commendable and “prompt” to the economic challenges. Although it warned that while the medium-term outlook is “favourable” for the Kenyan economy, “significant challenges remain against the backdrop of slow global economic growth and tight financial conditions.”

Despite its financial stress, however, the World Bank said the recent progress in the agricultural sector would likely lead to Kenya’s economic growth at a slightly faster pace than last year. The international lender in its latest biannual Kenya Economic Update report said the economy would expand by 5.0% in 2023, inching up from 4.8% last year.

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IMF mission concludes 4th loan program assessment in Egypt

Published

8 hours ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.