Kenya backing down on tax hikes will complicate IMF funding: Moody’s

JOHANNESBURG: Moody’s credit rating agency said Kenyan President William Ruto’s decision to withdraw planned tax hikes in response to widespread protests would complicate the disbursement of future International Monetary Fund funding.

“Larger fiscal deficits will increase the government’s borrowing requirements, which could add to pressure on domestic borrowing costs and increasing government liquidity risks,” Moody’s said in an issuer comment, which does not announce a rating action.

“Uncertainty over the fiscal trajectory and IMF programme would also challenge the government’s effort to increase external funding through, for example, a sustainability-linked bond,” it added.

Kenya braces for fresh protests despite president’s tax climbdown

Ruto said on Wednesday that his administration would reduce spending to compensate for the withdrawal of the planned tax increases contained in a highly contested finance bill.

But Moody’s said focusing more heavily on reducing spending rather than boosting revenue would almost certainly slow the pace of fiscal consolidation.