MEPs agreed to some of the strict conditions set by the International Monetary Fund (IMF), including the removal of tax breaks and exemptions.
In a report by the Committee on Budget and Appropriations on the Budget Policy Statement for 2021-2022 and the Medium-Term Debt Management Strategy, lawmakers also called on the National Treasury to speed up corporate restructuring. Heavily indebted state, a condition that had previously been issued by the IMF for the country’s access to a 262 billion shillings facility.
“The National Treasury should restructure public enterprises (EdE), in particular those highly indebted and unable to meet their operating costs, with a view to privatizing some of them by the end of the 2021-22 fiscal year. in order to put them into service. a solid economic base, ”said the committee chaired by Kieni MP Kanini Kega.
The committee also asked the Treasury to postpone new projects for a year until funding is available. Funding is also expected to be provided for stalled projects before finalizing budget estimates for 2021-2022.
The Treasury is also required to take into account overdue invoices and ensure that they are properly covered within approved spending limits.
Most of the changes had been taken into account by the National Treasury in the fiscal policy statement. However, the IMF had previously spoken out on them.
Last month, the IMF approved the crucial credit facility for Kenya as part of a three-year program.
Previously, the country had a precautionary credit agreement with the IMF, which ended after Kenya flouted some of the conditions, including not keeping its debt low.
The money is expected to help the country restart the economy following the adverse effects of the Covid-19 pandemic amid declining income.
The global lender said the combined program under the Extended Finance Facility and the Extended Credit Facility was also aimed at helping the country reduce its vulnerability to debt.
The deal is now awaiting approval from the IMF’s Executive Board, its highest decision-making body.
It will also see Kenya undertake a major restructuring of some of its ailing state-owned enterprises, reminiscent of the structural adjustment program of the 1990s that left thousands of civil servants jobless.
However, the Kenyan authorities have asked for some leeway to support some of the companies hit hard by the pandemic, the Treasury, for example, releasing 26 billion shillings to recapitalize cash-strapped Kenya Airways.
Another 500 million shillings has been invested in the Agricultural Finance Corporation, which lends to farmers.
The IMF’s program will see the country tighten its belt with spending cuts and higher taxes to reduce debt and preserve resources to protect vulnerable groups.
It is also expected to boost the country’s ongoing efforts to fight corruption, strengthen the monetary policy framework, and support financial stability.
Kenya plans to use the money to help boost the economy, which has been significantly affected by the pandemic.