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NEWS & CURRENT AFFAIRS

The Nairobian

Reduce extravagant spending instead of borrowing from IMF

Opinion

By Njahira Gitahi | Mar 24, 2025

**President William Ruto and International Monetary Fund Deputy Managing Director Nigel Andrew Lincoln at State House, Nairobi, on December 9, 2024.** [File, Standard]

The announcement by the International Monetary Fund (IMF) last week of its intention to give Kenya a new loan is both predictable and worrying. Of particular concern is why the government would approach the IMF with this request when, already, majority of the country’s revenue is spent on loan repayment. The government is spending billions of shillings every year on loan repayment and seeks to fix the problem by borrowing more money.

One would have hoped that the government would be working hard to ensure that last year’s protests, that began when the government sought to increase taxes as directed by the IMF, are not repeated. It is doubtful that the IMF would not recommend once again that taxes be increased in order for Kenya to be able to keep up with repayments. Indeed, last year when the IMF recommended a tax increase, it also highlighted that the increase would likely result in protests.

The current economic conditions are much worse than they were last year. Corporations are shifting their businesses to neighbouring countries due to ease of doing business there compared to Kenya. Several large companies have also announced that they are closing down. Online, small business owners are reporting that although their businesses were able to survive the Covid-19 lockdown, they are shutting down due to the current economic climate, hinting at the fact that the past two years have been worse for business than the pandemic was.

It is understandable that, in the same way that corporations are struggling to stay afloat, the government is also struggling to earn revenue. However, the approaches being taken to meet this need are not ideal. Numerous attempts to collect more tax revenue have failed. The government has gone out of its way to increase the tax collected, including setting targets for KRA and having officials walk the streets of Nairobi conducting random checks on businesses for tax compliance. Even with these efforts, alongside increasing the cost of goods, the government still finds itself short on revenue. To insist that the key to increasing government revenue is taxation when Kenyans’ pockets are empty would be to push the populace to the edge once more.

Taking on a new loan is also an unwise choice, and perhaps the easy way out as, in the eyes of the government, these loans are to be paid by the collective, and so the pain of a new loan is not felt at the Treasury. This choice is, however, a slap in the face of Kenyans, who made it resoundingly clear last year that the government must cut ties with the IMF. A government that does not listen to the cries of the people who put it into power is an uncaring one.

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Is it ever within the purview of the ruling class to cut back on spending in order to meet its revenue needs? Throughout recent history, there have been leaders who have been praised for reducing a nation’s reliance on loans by cutting back on government spending. Burkina Faso’s Thomas Sankara and Uruguay’s Jose Mujica gained international praise by cutting back on salaries and spending on luxury vehicles, and redirecting this money to projects that needed them in the education and health sectors.

By contrast, our government continues to allocate billions of shillings to projects, such as the perennial renovation of State House and the vehicles driven in large convoys by the President and other officials continue to be expensive and brand new. It is worrying that the government does not look into its own bloated spending, but instead chooses to continue to allocate money to its own luxuries, and relies on loans to meet the needs of the people. Those who speak up against the unnecessary spending, including the Auditor General, are met with scrutiny and threatened for doing their work with efficiency.

Kenyans must continue to demand that the government addresses its own corruption and rot, and must also continue to speak out their anger and dissatisfaction at the State’s reliance on loans that carry with them dire consequences for the average Kenyan. The government, too, must listen to its citizens, and prioritise people over pockets.

Ms Gitahi is an international lawyer