Kenya’s economic recovery is underway and government revenues have overperformed. This is according to the International Monetary Fund (IMF).
The body in its third review of the country’s economic programs under its wings discloses in the first half of FY21/22, tax collection overperformed projections by 0.4 percentage points of GDP, and the good performance continued in 2022. Strong policies by President Kenyatta’s administration have put Kenya in a better position to tackle challenges that emerged in 2022.
Global shocks, including the war in Ukraine, pushed inflation to 7.9 percent in June, even as non-food non-fuel inflation has remained much more modest at 2.9 percent. The Central Bank of Kenya adjusted its monetary policy stance in May 2022 to prevent second-round effects and to anchor inflation expectations as global prices have continued to rise.
Kenya is delivering on its quantitative targets under the program, meeting – and in some cases strongly overperforming – the objectives for tax revenue, the primary balance of the government, international foreign exchange reserves, and limits on the contracting of public debt.
Kenya has also met all the quantitative performance criteria under its IMF program. This review covered targets through end-December 2021.
By broadening the tax base and strengthening tax administration so that those who owe taxes pay taxes, the country generated extra revenues, overperforming its objectives by 0.4 percent of GDP in the first half of FY2021/22.
Revenues that provided resources to support additional government spending aimed at protecting Kenyan households – including support to communities afflicted by drought, fertilizer subsidies, and smoothing of price increases as fuel prices.