What if president’s bill was not passed?

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In 2012, International Monetary Fund (IMF) extended a precautionary loan for Kenya. In 2018, IMF gave Kenya an ultimatum of servicing part of its huge accrued debt of Sh100 billion else it withdrawals from financing Kenya in all matters development.

What would have happened if Kenya did not pass the presidents Finance Bill 2018 on tax proposals?

If Kenya failed to implement the above bill, then it means that IMF would have withdrawn Sh100 billion standby credit facility from the country hence Kenya would have had to incur high interest rates on loans it borrows from international lenders.

Donors hauled budgetary support in 2011 in Malawi. The situation crippled local foreign currency reserves, worsened the country’s economic decline, and directly impacted people.

Then, the country would have had to use its foreign reserves to cushion the shilling from external shock, increased imports and mounting pressure to pay foreign debt.

It is believed that Kenya has got $8.57 billion as foreign reserve which is equivalent to 5.7 import cover estimate of servicing foreign debt in a month which is way above the minimum recommended four months.

Also, since Kenya is china’s biggest importer, the country would have resulted in trading with it using its currency (Yuan).

According to experts, the likelihood of International Monetary Fund credit withdrawals would have not had a serious impact on the citizens but it could have resulted in a sour relationship with a Bretton Woods institution and the treasury.

For a country to qualify for IMF loan it should show proof of cutting back fiscal deficit and maintaining inflation levels within a set target range.

Since the bill has now been signed and effected, the president can now renegotiate with International Monetary Fund for extensions as the country seeks for alternative measures of serving part of this debt.

Suggestions are rife that the country should raise more revenue through merging some institutions to cut down on spending as is the case with Lake Victoria Development Basin. Also, experts have suggested the abolishment or merging parastatals to cut down on government spending.

Latest auditor general report shows that Kenya loses Sh400-Sh600 billion to corruption annually which is five or six times over World bank’s Sh71 billion servicing of debt annually.

The law of economic says, “Do not over tax the current generation for the comfort of the future generation.”