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In the wake of deadly protests, Kenyan President William Ruto had a phone conversation with International Monetary Fund (IMF) chief Kristalina Georgieva, according to diplomatic sources. The protests were triggered by Ruto's withdrawal of $2.7 billion in proposed tax hikes, a central component of policy reforms tied to a $3.6 billion IMF lending program.

The finance bill's withdrawal is expected to impact Kenya's ability to meet key targets within the IMF program. However, Kenya's recent ability to repay a $2 billion bond by issuing a new seven-year bond has lessened the immediate need for IMF cash.

The IMF has faced significant criticism from young Kenyan protesters, who blame it for the proposed tax increases. While details of the Ruto-Georgieva call remain undisclosed, sources indicate that major donors agree on the necessity for the IMF to show flexibility regarding program targets, as Kenya seeks to address the financial gap created by the bill's withdrawal.

One source emphasized the importance of the Kenyan government demonstrating a commitment to reducing wasteful spending, cracking down on corruption, and increasing accountability in exchange for the IMF's flexibility.

In early June, the IMF reached a staff-level agreement with Kenya on a policy package needed to complete the lending program's seventh review. This review is crucial for unlocking a disbursement of several hundred million dollars, pending approval from the IMF's Executive Board.

"We remain deeply concerned by the recent tragic events in Kenya and maintain close, ongoing, and constructive dialogue with the Kenyan authorities," an IMF spokesperson stated.

Ruto's office has not responded to requests for comments. Following the bill's shelving, Ruto has promised austerity measures in a supplemental budget, while also indicating the necessity for increased borrowing in the 2024/25 fiscal year.

An IMF spokesperson reiterated the fund's commitment to helping Kenya overcome its economic challenges and improve the well-being of its people. Pavel Mamai, managing partner and portfolio manager at Promeritum Investment Management, believes that while IMF support will continue, disbursements are likely to resume towards the end of the year. "The IMF will basically ask Kenya to regroup and present a new reform plan," Mamai said.

Since mid-June, at least 39 people have died in protests, according to a government-funded human rights organization. Although anti-government demonstrations have persisted, turnout has decreased since the withdrawal of the bill.