IMF to Kenya: Let Them Eat Bullets!

Demands by the International Monetary Fund that Kenya implement an internal looting policy in order to pay off its foreign debt has sparked a massive nationwide anti IMF and anti government movement, primarily led by young people calling themselves Generation X. The protests began after the government of President William Ruto introduced on May 9 the Finance Bill 2024, which called for steep tax increases on income, food and other essentials. In response to the demonstrations that engulfed the country, President Ruto deployed heavily armed riot police and the military, leading to up to 30 deaths and hundreds wounded. Far from stopping the demonstrators, the repression led to calls for his removal. The popular outrage, including the ransacking of parliament, finally compelled Ruto to announce that he would not sign the Finance Bill, causing it to be withdrawn.

In his address to the nation, Ruto admitted his government was struggling to reduce the debt burden, which he said consumes 61 out of every 100 shillings the government collects in taxes. He subsequently announced that he had issued instructions to cut expenditures by $2.7 billion to cover the loss in new tax revenue. Ruto was simply was taking his orders from the IMF.

This development is being watched nervously from London, with feature articles in Financial Times and from Reuters. The IMF sent tearless “condolences”, saying they were “deeply concerned” over the loss of lives, but were otherwise “closely monitoring the situation in Kenya.” The fear, as mentioned directly by FT, is that the protest “spirit” will spread, specifically to Nigeria, but also to Argentina and other countries.

Kenya is only one of several key African countries, including Nigeria, Ghana, Zambia and Eypt, that have been put under the thumb of the IMF. Kenya’s foreign debt at the end of March 2024 was at $39.2 billion, down from last year’s $45 bn. Most of it is from multilateral institutions and bilateral loans. Debt to China, most of which is bilateral and linked to real economic projects, is only $5.7 bn. In the past 20 years, Kenya invested some $82 billion to build roads, railways and factories financed by debt on concessionary terms and linked directly to specific projects.

The toxic debt is the private debt to international bond holders, who alone hold $7.2 bn of Kenya’s foreign obligations raised on the European money markets. According to the African Development Bank, 44% of the foreign debt of all of Africa is in the form of such bonds, which have excessive interest rates, some more than 10%, which means some countries have to spend as much as 65% of their GDP on servicing foreign debt.

This is neocolonialism at its worst. The solution to the problem lies in a debt moratorium and a new financial system committed to extending low interest credit for economic development.