Treasury Under Fire Over Spending Of IMF’s Ksh41bn

The Institute of Public Finance (IPF) has asked the National Treasury to explain the funding of specific projects funded through Ksh41.8 billion received from the International Monetary Fund (IMF) in form of Special Drawing Rights (SDR).

IPF says Treasury has failed to explain whether the proceeds from the SDR allocation were directed to targeted programmes or specific expenditures as Kenya received Ksh83.7 billion ($740 million) to boost its foreign reserves in August 2021.

The funds were allocated to Kenya as part of the multilateral lender’s bailout to all countries, to ease the balance of payment constraints for COVID-hit economies.

The government in December told the IMF that it will use part of the Ksh83.7 billion locally and would borrow half of the SDR allocation from the Central Bank of Kenya (CBK) in local currency and repay in 30 years.

The SDR allocation was crucial to building up Kenya’s forex reserves in September to $9.6 billion.

A report jointly authored by IPF, a think tank based in Nairobi and Christian Aid, an international NGO headquartered in London, says its review could not identify specific projects funded through 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 effects of the COVID-19 pandemic and buy jabs.