Western nations urge Kenya to seek IMF review of corruption issues, Reuters sources say

By Aaron Ross

NAIROBI (Reuters) – Major shareholders of the International Monetary Fund are urging Kenya to request an IMF assessment of corruption and governance problems as part of efforts to unlock loans that have been blocked by the suspension of tax increases, two diplomatic sources said.

Payment of about $600 million under an IMF plan that expires next year has been suspended since the Kenyan government in June withdrew $2.7 billion in tax increases in response to mass protests.

The protests, in which more than 50 people have been killed, have brought issues of corruption and misrule to the fore, with young protesters complaining that their taxes are being used to fund politicians’ lavish lifestyles.

Western governments have encouraged a governance diagnostic, or IMF assessment of corruption and governance vulnerabilities, the two sources said. They spoke on condition of anonymity to discuss private conversations.

A governance diagnosis must be requested by the country concerned. One source said such a request would facilitate discussions about additional IMF support.

Kenya’s Ministry of Finance did not respond to requests for comment. IMF spokesmen in Washington did not immediately respond to a request for comment.

Since 2014, the IMF has published governance diagnostic reports for 14 countries, including Ukraine, Cameroon and Sri Lanka, and additional diagnostics are underway, according to the Fund’s website.

Kenyan authorities are looking for new revenue-raising measures after canceling tax hikes.

Finance Minister John Mbadi said in August that the government would have to restore some measures from the abandoned bill. However, last month Mbadi said he would seek suggestions from the public on new legislation to raise revenue.

Diplomatic sources say the government will need to present a credible plan to reduce its fiscal deficit before the IMF will consider further payments.