The International Monetary Fund has called for urgent tax reforms in Kenya after expressing concerns over recent revenue shortfalls, asking for prompt implementation of corrective steps.
“On tax collections, Directors expressed concerns over recent shortfalls and called for urgent implementation of corrective measures, including timely adoption of measures in the Medium-Term Revenue Strategy,” the IMF said Wednesday in a statement after concluding a review of Kenya’s $2.34 billion loan program.
The IMF’s executive board completed the sixth review of the loan program that was initially approved in 2021. The Washington-based lender allowed Kenya to access $624.5 million immediately but also asked authorities to take remedial steps after revenues lagged goals.
Kenya needs to improve tax compliance and efficiency while protecting social spending, the IMF said. The East African nation has a “positive medium-term outlook” but faces high debt vulnerabilities, it added.
“Implementation of the Medium-Term Revenue Strategy would be key to reverse the erosion in the tax base while promoting equity and fairness in the tax regime and create more space for spending to improve public services,” the IMF said.
Kenya’s economy grew an estimated 5.5% last year and is expected to expand around 5% this year, supported by agriculture. However, tighter policies slowed non-agricultural growth, the IMF said in its review.
It warned Kenya faces uncertainty in the near term but said authorities should remain resolute. The fund called for allowing the shilling currency to “respond flexibly to market conditions.”
While welcoming Kenya’s focus on inclusive and green growth, the IMF urged strengthened governance and anti-corruption efforts. It also encouraged Kenya to address anti-money laundering deficiencies.
“The authorities’ commitment to fiscal consolidation while protecting essential social and developmental spending should support efforts to bring down the debt burden,” the IMF said. It projects Kenya’s debt-to-GDP ratio will decline to 55% by 2029 from about 70% currently.
The IMF has disbursed a total of $2.6 billion to Kenya under the 38-month lending program that expires in April 2025. The arrangement aims to help Kenya restore debt sustainability and policy buffers against economic shocks.
