The International Monetary Fund (IMF) is closely monitoring the court case around the Finance Act days after its executive board gave the new law approval as a buffer against debt default.
The board after completing fifth reviews under Kenya’s extended Fund Facility and Extended Credit Facility, allowing for an immediate disbursement of about USD415.4 million, noted the approval of the Financial Year 2023/24 Budget and 2023 Finance Act are crucial steps to support the ongoing consolidation efforts to reduce debt vulnerabilities while protecting social and development expenditures.
“Depending on what comes out from the courts against the Finance Act, we will regroup with the authority to look at the contingency plans in place, our discussions will depend on parts of the act the High Court will do away with, or if it blocks completely implementation of the law,” said IMF Mission Chief for Kenya, Haimanot Teferra said on Wednesday in a media briefing in Nairobi.
“The government thinks the Finance Act is constitutional and will hold,” she said.
The Bretton Woods institution says the new taxes under the Finance Act are essential for the government to raise more money to boost the economy.
President William Ruto assented to the Finance Act on June 26, 2023. The act’s implementation was to take effect on July 1, this year. However, the court has suspended the act.
Chief Justice Martha Koome has appointed a three-judge bench to hear the petition filed by Busia Senator Okiya Omtatah challenging the act. The appointment of presiding judge David Majanja, Justice Lawrence Mugambi and Christine Meoli now sets in motion the hearing of the petition and eventual determination of the case which petitioner claims its passage in parliament was unprocedural, and that it will affect many Kenyans who are already feeling the heat of high cost of living.
IMF COMPLETES FIFTH REVIEW
IMF Board on Monday completed the fifth reviews under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) arrangements for Kenya. The Board also approved an extension of the EFF/ECF arrangements from the current 38 months to 48 months (through April 1, 2025) to allow sufficient time to implement the authorities’ reform agenda.
The Board’s decision allows for an immediate disbursement of about US$415.4 million, bringing total disbursements under the arrangements so far to about US$2.04 billion. In completing the review, the Executive Board also approved modification of program conditionalities, waivers of nonobservance of the continuous performance criteria on accumulation of external arrears.
The Executive Board also approved Kenya’s request for an arrangement under the Resilience and Sustainability Facility (RSF) of about US$551.4 million to support ambitious efforts to build resilience to climate change.
Teferra also exuded confidence in measures taken by the Central Bank of Kenya (CBK) in moderating the shillings against the dollar.
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