Musings From Abroad

Kenya’s tax bill chaos affects IMF funding, may increase borrowing costs

Published

5 months ago

June 29, 2024

There are concerns that Kenya’s president, William Ruto, may have to back down from a financial law due to violent turmoil, casting doubt on the country’s ability to meet IMF targets, and perhaps raising borrowing costs.

Unpopular taxes on bread, sugar, vegetable oil, mobile money transfers, and some imports were included in the law.

Although the IMF did not respond right away when asked if it would change Kenya’s necessary goals, Neville Z. Mandimika of Morgan Stanley stated in a note that the original plan was to generate additional revenue of 346 billion Kenyan shillings ($2.68 billion), or 3% of GDP. Its withdrawal “will likely result in Kenya missing the 4.7% fiscal deficit target this year and 3.5% target next year as per the IMF programme,” he said.

“Our main goal in supporting Kenya is to help it overcome the difficult economic challenges it faces and improve its economic prospects and the well-being of its people,” IMF spokesperson Julie Kozack said in a statement.

Kenya signed on for additional financing to help climate change initiatives in May 2023, bringing its total IMF loan access to $3.6 billion. Kenya had already agreed to a four-year loan with the IMF in 2021. Before releasing finance tranches, the IMF mandates periodic evaluations of reforms, in Kenya’s instance every six months.

Before President William Ruto abandoned the tax bill on Wednesday, Kenya and the IMF reached a staff-level agreement earlier this month on a seventh assessment, with a warning of potential revenue shortfalls. The study theoretically cleared the way for $976 million, but it failed to obtain important IMF board approval.

“There isn’t a great deal of room to manoeuvre unless you start doing much more thorough reviews” of spending, said Giulia Pelligrini, senior portfolio manager with Allianz Global Investors, of what Kenya can do to meet targets. “So it’s going to be difficult.”

She continued by saying that the anticipated conclusion will be a combination of government budget cuts and IMF flexibility on program aims.

Following Ruto’s reversal, Kenya’s sovereign dollar bonds declined. According to Morgan Stanley, Kenya had less access to foreign bonds now that eurobond yields were back above 10%, which would force them to borrow more money domestically.

“The next catalyst for spreads would be statements from the IMF on how the programme will be recalibrated to reflect this new reality,” Mandimika wrote.

Musings From Abroad

EU withdraws Niger diplomat after junta accuses it of mismanaging aid

Published

37 minutes ago

November 24, 2024

Ifeoluwa Dada

The European External Action Service (EEAS) has announced that the European Union would return its ambassador from Niger after the governing military in the nation questioned how an EU team handled humanitarian supplies intended for flood victims.

In a statement released on Friday, the junta in Niger accused the EU ambassador in the West African nation of distributing a 1.3 million euro flood relief grant to many foreign nongovernmental organisations in an opaque way and without working with the government.

Consequently, it mandated an audit of the fund’s administration.

“The European Union expresses its profound disagreement with the allegations and justifications put forward by the transitional authorities,” the EEAS said.

“Consequently, the EU has decided to recall its ambassador from Niamey for consultations in Brussels.”

Niger has been under military rule since the junta seized power in a 2023 coup.

Musings From Abroad

Mpox remains health emergency, WHO insists

Published

2 hours ago

November 24, 2024

Ifeoluwa Dada

The World Health Organisation (WHO) has insisted that the Mpox epidemic remains a public health emergency.

WHO first declared an emergency when a new strain of mpox spread from the severely affected Democratic Republic of the Congo to neighbouring countries in August.

The WHO Director-General has decided that the increase in mpox still qualifies as a public health emergency of worldwide significance after the WHO called a meeting of its Emergency Committee and followed its recommendations.

According to WHO, the decision was made in light of the growing number and ongoing geographic dispersion of cases, field operating difficulties, and the requirement to establish and maintain a coordinated response across nations and partners.

Mpox is a virus that is spread by close contact and usually manifests as pus-filled lesions and flu-like symptoms. Although it is typically minor, it can be fatal.

More than 1,000 suspected deaths and more than 46,000 suspected cases have been reported this year throughout Africa, primarily in Congo.

The WHO’s highest level of warning, known as a “public health emergency of international concern,” was previously used to describe a worldwide epidemic of a different type of mpox in 2022–2023.

This year’s notice was issued in response to the transmission of a novel viral variation known as clade Ib. Among other nations, cases of this variation have been verified in the UK, Germany, Sweden, and India.

Following criticism for moving too slowly on vaccinations, WHO approved Bavarian Nordic’s mpox vaccine in September and listed Japan’s KM Biologics vaccine for emergency use earlier this month.