Kenya's Anti-Finance Bill Demos: Retracing IMF's Policies in Africa

Context

Kenya has seen several?? days online and street? protests in its? major towns which culminated??in the? demonstrators forcing their way into Kenya Parliament? minutes? after Kenya Finance Bill was passed. Subsequently , even though Kenya’s president initially came out talking tough? and promising the protestors a ‘tough’ response, on 26th June, 2024 , he softened his stand, conceded to the demands? that the entire Finance Bill be withdrawn ?, and accordingly sent back the Bill to Parliament with a “ delete all clauses” comment.

The Finance Bill in question has been described as being a project? of the International Monetary Fund especially because it has several tax measures that majority of Kenyans feel were going to hurt many ?already unemployed individuals, the old , women and? children and the struggling Micro, Small and Medium Enterprises (MSMEs).

Against this backdrop? it is important to trace IMF’s policies especially in Africa particularly the so called Structural Adjustment Programmes? and their impact in Africa’s economies.

According to historical accounts, the current policies of? the IMF can be traced back to the thinking of 20th? Century economists. For instance, in In 1919, John Maynard Keynes published? The Economic Consequences of the Peace and contended that the Great War ?had shaken system so much and this has thereby putting Europe in danger. Subsequently in 1936 Keynes in? The General Theory of Employment, Interest, and Money proffered a manual to save capitalism by a theoretical plea for governments to use state resources to recycle profits and balance an unbalanceable system.

Fast-forward to 1944

It worth noting that Keynes was one of the Key figures When the US? as its allies met in Bretton Woods. As captured in Activities 1941-1946: Shaping the Post-War World: Bretton Woods and Reparations, at the conference, Keynes famously made the following statements regarding the presence of the (21) countries that had been invited and which included colonized countries like primarily colonized countries, from Guatemala and Liberia to Iraq and the Philippines:

“Twenty-one countries have been invited which clearly have nothing to contribute and will merely encumber the ground, namely, Colombia, Costa Rica, Dominica, Ecuador, Salvador, Guatemala, Haiti, Honduras, Liberia, Nicaragua, Panama, Paraguay, Philippines, Venezuela, Peru, Uruguay, Ethiopia, Iceland, Iran, Iraq, Luxemburg. The most monstrous monkey house assembled for years. To these might perhaps be added: Egypt, Chile and (in present circumstances) Yugo-Slavia.”

Keynes preferred that the two founder states of the Bretton Woods Conference, the United Kingdom and the United States, ‘settle the charter and the main details of the new body without being subjected to the delays and confused counsels of an international conference.

What is further intriguing is that Keynes acting on behalf of the United Kingdom, and Harry Dexter White acting on behalf of the United States arrived at the meeting with two plans already drafted. It is these drafts that became to building blocks of ??the final Articles of Agreement for the International Monetary Fund as well as the International Bank for Reconstruction and Development (the World Bank). The role of the IMF was essentially tasked with preventing any short-term problems from becoming long-term crises, such as by maintaining exchange rate stability and facilitating loans to prevent balance-of-payments spirals ‘without resorting to measures destructive to national or international prosperity. The upshot of the above is that global south countries have largely remained rule takers as opposed to rule makes with regards to international financial architecture.

From Colonialism into IMF’s Arms

As many countries were coming out of colonial rule, a large number of the became members of the IMF with 1961 seeing the creation of the IMF Africa Department. Until the Third World Debt Crisis that began to spiral with Mexico’s default in 1982, the IMF had primarily operated by providing short-term financing in a relatively modest fashion through the Compensatory Financing Facility (1963) and the Buffer Stock Financing Facility (1969).

IMF’s foray into Kenya- From SAPS to Tax Measures

Mwangi Githathu in his analysis Looking Back at the SAPs Processes of the Early 1990s , ??delves into the? Structural Adjustment Programmes of the early 1990s that left ordinary Kenyans reeling under extreme economic hardship and which are seemingly back three decades later inflicting economic pain on Kenyans.

Structural Adjustment Programmes are ?a set of policy changes or reforms, which combine short-run stabilization measures and longer-run adjustment measures. In particular, the measures consist of the following elements: fiscal policies aimed at reducing budget deficits through tax increase and reduction of public expenditure. See more on Kenya’s SAPs in this piece. According to Rono in The impact of the structural adjustment , SAPs have been linked to the high rate of income inequality, inflation, unemployment, retrenchments and so on, which have lowered the living standards, especially, those relating to the material resources in the family. It is easily understandable therefore if the current dissatisfaction with the finance bill is partly linked to the perception that IMF may have had a hand in its drafting.

According to IMF , “the IMF team and the Kenyan authorities have reached a staff-level agreement on a comprehensive policy package needed to complete the seventh reviews of Kenya’s economic program under the EFF/ECF arrangements and the second review of the RSF arrangement. The policy package seeks to preserve debt sustainability and price stability, manage fiscal risks, address financial sector vulnerabilities, and AML/CFT deficiencies while continuing to advance structural reforms to support inclusive and resilient growth.” It is some of these ‘reforms’ which came in the form of the some of the provisions of the Finance Bill 2024 that led to the deadly protests. The question remains, which way will the reforms head next?