Cotu pushes for end to ‘tough’ IMF-backed economic reforms

The Central Organisation of Trade Unions (Cotu) has raised concerns over the government’s dalliance with the International Monetary Fund (IMF), blaming the multilateral lender for the fall of the Kenya shilling.

Cotu blamed the IMF for introducing tough conditions for funding Kenya, which it says have not only raised the cost of living but also contributed to the depreciation of the shilling.

The labour movement, briefing the media after a meeting of its affiliate unions, warned that Kenya was returning to economic difficulties witnessed in the 80s and 90s, during the infamous Structural Adjustment Programmes.

“We in the labour movement don’t want to have any programme with the World Bank and IMF and we are alerting the government that if it listens 100 percent to the IMF then we will go down. What they are doing does not reflect the real economic activities on the ground,” said Cotu secretary-general, Francis Atwoli.

He called on economists to “speak up that what is happening on the devaluation of our shilling on the recommendation of the IMF and World Bank is not real”.

Cotu hit out at the IMF, blaming the lender for the incessant pressure resulting in the weakening of the Kenya shilling vis-à-vis the dollar.

Cotu said the weak currency had drained the workers’ purchasing power and savings. The unions blamed Treasury Cabinet Secretary Njuguna Ndung’u and Central Bank of Kenya governor Kamau Thugge for being too soft to the IMF, unlike their predecessors.

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, noting that “the previous governor of the Central Bank had put glues in his ears. He was not listening to them because what they are doing does not reflect the real economic activities on the ground.”

With the shilling on a downward spiral, the country’s international trade balance continues to be negative, further weakening the shilling as more foreign currency is needed for imports, making it difficult for importers to pay for their products due to the high exchange rates.

The union also cautioned the government against continued heavy borrowing, including from the multilateral lenders, whom it sees extend funds with tough conditionalities.

Kenya’s public debt hit Sh8.6 trillion by September last year and the government plans to borrow Sh861 billion during the year ending June, based on projections from the Treasury.

“Considering this increase, and given that the government is continually borrowing to pull itself out of the cash crunch, things are not looking better,” said Mr Atwoli.

“How do we borrow to save an economy from being ruined by borrowing? How do we determine how much to borrow domestically or externally?” he posed.

The labour movement raises concerns just a week after the IMF released about Sh150 billion following the conclusion of the sixth review of the ECF/EFF programme, bringing to $2.6 billion (about Sh416 billion) the total amount Kenya has so far received from the multilateral lender since launch of the programme in April 2021.

The programme was originally planned to end this year but was extended by 10 months in July last year, to now end April 2025.

The multilateral lender has been behind most of the changes the government has implemented on public finances, mainly newly introduced taxes and additional taxes since the start of the programme. The IMF also criticized the government’s fuel subsidy programme that President William Ruto’s government started scrapping soon after he was sworn into office last year, and supported raising of the Value Added Tax (VAT) on petroleum products from 8 percent to 16 percent, which was implemented in July 2023.

“In completing the reviews, the Executive Board also approved modification of program conditionalities, waivers of nonobservance of the continuous performance criterion on no new accumulation of external arrears and the end-June 2023 and end-December 2023 tax revenue targets considering the corrective actions taken by the authorities, and waiver of applicability for all other end-December 2023 performance criteria,” the IMF’s Executive Board said in a press release following conclusion of the sixth review last week.

The IMF is also behind the pressure for restructuring of several state corporations mainly the Kenya Power and Kenya Airways and continued to note in its latest report, the need to wean them off exchequer support.

“Kenya’s performance under the ECF/EFF arrangements have been mixed with adherence to quantitative targets being broadly satisfactory. The authorities have made welcome progress in some key areas, including governance and public financial management. Continued implementation of corrective measures to address missed targets and accelerated reforms will be important,” said Ms Antoinette Sayeh, IMF’s Deputy Managing Director and Acting Chair to the Executive Board.

The labour movement sees the multinational financial institution’s continued dictation on the government’s policy actions as contributing to economic struggles, mainly depreciation of the shilling, which has sparked capital flight as foreign investors shun Kenya.