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The Hindu profiles on International Monetary Fund by G. Sampath on June 30, 2024

Kenya is roiled by protests against a new finance Bill introduced by the government of President William Ruto. As demonstrations spread across the country’s 47 counties, protesters in the capital Nairobi attempted to storm the Parliament. The government clamped down, with 30 people killed in police firing and over 200 injured. Mr. Ruto eventually bowed to public pressure and announced he would not sign the controversial Bill, which sought to raise taxes on essentials such as bread, cooking oil, sugar and diapers.

Despite Mr. Ruto backing down, the protesters have called for his resignation. They see him as more loyal to the International Monetary Fund (IMF) than to the people of Kenya. A sign from the protests seemed to reflect the public mood: ‘Kenya is not IMF’s lab rat,’ it read. Fed up with the burden of rising living costs, Kenyans are not only protesting against Mr. Ruto’s policies but also, explicitly, against the IMF meddling in their country’s affairs. But why are they angry with the IMF, and why is the IMF dictating policy to the Ruto regime?

In 2021, Kenya signed a four-year loan agreement with the IMF for $2.34 billion, and with another deal signed in May 2023, its loan volume rose to $3.6 billion. But IMF money for developing countries comes in tranches, and with conditions. It periodically reviews the country’s progress in implementing its conditions, and only if it is convinced the country is on track, does it release the next tranche of funds.

As part of the 2021 loan deal, the IMF forced a COVID-battered Kenya to agree to austerity measures that would raise its revenue collection to 25% of GDP. The lender’s demands included a combination of tax hikes and budget cuts, including elimination of subsidies on fuel and electricity and cuts in spending on education and health.

Mr. Ruto, when he came to power in September 2022, went about diligently following the IMF diktat. He cut subsidies on maize and fuel, with the latter sparking a surge in inflation. Massive protests ensued in March and July 2023, in which 30 people were killed by the police. Nonetheless, Mr. Ruto stayed the course on other fiscal consolidation measures, and earlier this month, his government reached a staff level agreement with the IMF. It was expected to open the tap on another $976 million, provided the finance Bill — projected to raise revenues of $2.68 billion — went through. But with Mr. Ruto forced to abandon it, the future flow of IMF funds is in doubt.

None of this, however, is new. Kenya has been through this before, as have much of Africa, whose governments often find themselves caught between the interests of their people and that of private investors and Western commercial banks, fronted by the IMF. The IMF describes itself as “being governed by and accountable to its member countries”. But its history and management structure tell a different story — of an organisation that has served as a tool of American foreign policy, and works to further the interests of Western financial elites.

In 1944, when the IMF was created at a conference of 44 nations in Bretton Woods, New Hampshire, the U.S., the global supremacy of American economic might was already a reality, with the rest of the world either devastated by the Second World War II or by colonial plunder, or both. This power dynamic got encoded into both the Bretton Woods twins — the IMF and the World Bank. For instance, the World Bank president is always an American citizen, while the IMF head is always from a European ally of the U.S.