The International Monetary Fund (IMF) has asked the government to cut its spending to mitigate against economic shocks from the ongoing Middle East conflict.
National Treasury Cabinet Secretary John Mbadi says Kenya’s fiscal discipline and governance took centre stage during discussions with the IMF team, with Kenya’s request on the funded programme set to continue.
The Middle East war involving the United States, Israel and Iran has caused logistical disruption, with the IMF warning that the closure of the Strait of Hormuz, a key chokepoint for oil and gas flow will increase energy prices.
To mitigate the effects of the war on energy prices, the Fund is asking the Kenyan government to reduce its spending to stabilise the economy.
The IMF team, led by Haimanot Teferra, highlighted the need to strengthen fiscal discipline and enhance good governance.
“The IMF staff team engaged with the authorities on recent macroeconomic and policy developments and key risks, including potential spillovers from developments in the Middle East. Discussions highlighted the need to strengthen fiscal discipline, enhance fiscal credibility, and build resilience to external shocks,” said Teferra in a statement.
A statement by the Washington-based further says,” These efforts should be supported by strengthened governance and greater public sector efficiency.”
Discussions with the authorities will continue during the upcoming IMF-World Bank Group Spring Meetings.
The National Treasury says the discussion mainly centred on Kenya’s fiscal reform agenda with emphasis on domestic revenue mobilisation, strengthening the medium-term fiscal framework, enhancing public expenditure efficiency and deepening institutional capacity.
