A proposed tax hike sparked unrest, but Kenya’s real problem is a debt crisis.
Around $35 million of that debt is owned by foreign creditors, primarily China and powerful international groups like the World Bank and the International Monetary Fund (IMF).
But Kenya’s economic woes didn’t start recently; the nation’s immense debt stems from an economic boom in the early 2000s, when the government borrowed money from a variety of international creditors to fund public infrastructure projects, supporting agriculture and small and medium businesses and external debt servicing but failed to invest those loans in ways that could grow the economy.
China can lend on whatever terms China wants to, but isn’t the IMF supposed to sanity-check spending when a country comes to them for money, and reject loans if they aren’t going to produce a return?
When a country borrows from the IMF, the government agrees to adjust its economic policies to overcome the problems that led it to seek financial assistance. These policy adjustments are conditions for IMF loans and help to ensure that the country adopts strong and effective policies.
Why do IMF loans include conditions?
Conditionality helps countries solve balance of payments problems without resorting to measures that harm national or international prosperity. In addition, the measures aim to safeguard IMF resources by ensuring that the country’s finances will be strong enough to repay the loan, allowing other countries to use the resources if needed in the future. Conditionality is included in financing and non-financing IMF programs with the aim to progress towards the agreed policy goals.
So, I’d think that at least one of three things happened here:
The IMF’s requirements weren’t sufficiently-strong.
The IMF’s requirements weren’t actually enforced; Kenya did something else with the money.
Something unforeseeable happened (I assume that COVID-19 might have been a factor, as that impacted economies elsewhere).
reads further
Ultimately, even raising capital is a short-term financial fix to the long-term political problems of corruption, waste, and mismanagement. Efforts to undo those patterns are likely to anger the ultra-wealthy, whose businesses depend on corrupt relationships with the government to thrive.
Well, okay, but taking anticorruption actions can be a requirement of loans. Maybe the government has to decide whether they want to keep those connected people happy or get a loan.
looks back at IMF factsheet
They even list that as a condition that they can impose:
China can lend on whatever terms China wants to, but isn’t the IMF supposed to sanity-check spending when a country comes to them for money, and reject loans if they aren’t going to produce a return?
kagis
https://www.imf.org/en/About/Factsheets/Sheets/2023/IMF-Conditionality
So, I’d think that at least one of three things happened here:
The IMF’s requirements weren’t sufficiently-strong.
The IMF’s requirements weren’t actually enforced; Kenya did something else with the money.
Something unforeseeable happened (I assume that COVID-19 might have been a factor, as that impacted economies elsewhere).
reads further
Well, okay, but taking anticorruption actions can be a requirement of loans. Maybe the government has to decide whether they want to keep those connected people happy or get a loan.
looks back at IMF factsheet
They even list that as a condition that they can impose:
https://www.imf.org/en/About/Factsheets/Sheets/2023/IMF-Conditionality