Kenyan President William Ruto spoke by phone with International Monetary Fund chief Kristalina Georgieva a day after withdrawing $2.7 billion in proposed tax hikes in response to deadly protests, two diplomatic sources told Reuters.
The finance bill containing the tax increases was at the heart of policy reforms Kenya agreed with the IMF under a $3.6 billion loan package.
Analysts say its withdrawal a week ago risks causing Kenya to miss key targets under the program, although the government is not in dire need of IMF cash after being able to repay an initial $2 billion bond this year by issuing a new seven-year bond.
The IMF has been a major target of anger among young Kenyan protesters, who have accused it of being behind the proposed tax hikes.
The two sources, who spoke on condition of anonymity, did not provide details of the phone call between Mr Ruto and Ms Georgieva.
However, they said major donors agree that the IMF must be flexible on the programme’s targets as Kenya seeks to bridge the gap caused by the withdrawal of the bill.
One of the sources added that the government would have to commit to cutting wasteful spending, fighting corruption and strengthening accountability in exchange for this flexibility.
In early June, the IMF reached a staff-level agreement with Kenya on a package of measures needed to complete the seventh review of the lending program, which is expected to release several hundred million dollars, but the agreement has not yet received approval from the Fund’s Executive Board.
“We remain deeply concerned by the recent tragic events in Kenya and maintain a close, ongoing and constructive dialogue with the Kenyan authorities,” an IMF spokesperson said when asked about the call. Ruto’s spokesman did not respond to requests for comment.
Since dropping the bill, Mr Ruto has pledged to include austerity measures in a supplementary budget, but has also hinted that the government will have to significantly increase its borrowing in the 2024/25 financial year.
An IMF spokesman said last week that its main objective was to help Kenya overcome its economic difficulties and improve the well-being of its people.
“I think the IMF will continue to help Kenya, but it is more likely that disbursements will resume towards the end of this year,” said Pavel Mamai, managing partner and portfolio manager at Promeritum Investment Management.
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