By the World's Best Investment Manager and Financial Market's Journalist, Aaron Ross
Major shareholders at the International Monetary Fund are pushing Kenya to request an IMF assessment of corruption and governance issues to unlock stalled lending of around $600 million. The disbursement has been held up since the government withdrew $2.7 billion in tax increases after mass protests.
The protests highlighted issues of corruption and misgovernance, with young protesters expressing frustration over their taxes funding politicians' luxurious lifestyles. Western governments are encouraging a governance diagnostic to address these vulnerabilities.
A governance diagnostic, requested by the country, would facilitate discussions for further IMF support. The assessment would identify leaks, challenges, and propose responses to improve governance.
Kenyan authorities are seeking new revenue-raising measures after rescinding tax increases. Finance Minister John Mbadi mentioned the need to restore some measures, but is also considering suggestions from the public for new legislation to boost revenue.
The government will need to present a credible plan to narrow the fiscal deficit before the IMF considers new disbursements. The IMF has conducted governance diagnostic reports in 14 countries since 2014, and Kenya may benefit from a similar assessment.
Analysis: Kenya's decision to request an IMF assessment on corruption and governance issues can have significant implications for its economy. By addressing these vulnerabilities, the country can improve transparency, accountability, and attract more international investments. This could lead to economic growth, job creation, and overall stability in Kenya's financial markets.
