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Tuesday, January 31, 2023

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Treasury on spot over Sh41bn received from IMF

Treasury on spot over how is spent Sh41bn received from IMF in form of special drawing rights (SDR).

A lobby has demanded that the Treasury provide an explanation for the funding of specific projects using the Sh41.8 billion it got from the IMF in the form of Special drawing rights (SDR).

According to the Institute of Public Finance (IPF), the Treasury has not provided sufficient justification for how the SDR allocation’s proceeds were allocated, either to specific programs or expenses.

Kenya received $740 million (Sh83.7 billion) in August 2021 to increase its foreign exchange reserves.

As part of the multilateral lender’s rescue of all nations, Kenya received the funds in order to support the economies hurt by Covid’s balance of payment difficulties.

The government informed the IMF in December that it will utilize some of the Sh83.7 billion locally and borrow half of the allotted SDRs from the CBK in local currency with a 30-year repayment period.

Kenya’s foreign reserves increased to $9.6 billion in September thanks in large part to the SDR grant.

According to a report co-authored by Christian Aid, a global NGO with headquarters in London, and the Nairobi-based think tank IPF, its investigation could not pinpoint specific initiatives supported by the SDR.

The group said the CBK and the Treasury informed them that the SDR was spent on budget support without disclosing the specific projects funded.

“The government reports that it deviated from the principles of fiscal responsibility where part of the borrowed funds was used to finance 17.7 percent of recurrent expenditure and external loans redemption,” said Veronicah Ndegwa, a senior analyst at IPF.

She said, according to the Treasury, the deviation was occasioned by the need to cushion the poor from the effects of the Covid-19 pandemic and buy jabs.

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