President William Ruto wants the West-controlled International Monetary Fund (IMF) and the World Bank replaced as the preferred global lenders even as he called for an overhaul of the current financial system.
The President also proposed for the world to set up a $500 billion annual credit line to refinance maturing official debt for struggling economies into new long-term loans of 50-year maturity and a 10 to 20-year grace period.
Dr Ruto, whose government has received billions of dollars in loans from the IMF and the World Bank, called for the implementation of a fair global financial architecture that will guarantee equality to all the members.
Speaking during a round table in Paris, France, the President called for a new financial tax at the global level that would be paid even by the member countries in proportion to their economic strength.
“And we want those resources controlled, not by the IMF and World Bank. Because IMF and World Bank, you have the final say, we do not have the final say,” said Dr Ruto.
“We want another organisation of equals where you have as much say because you pay, as much as we do because we pay,” added the head of state.
He also pushed for a new multilateral climate action financing mechanism, financed from global carbon taxes on fossil fuel, aviation, and marine transport financial transactions to finance and protect nature regeneration.
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Dr Ruto spoke yesterday during a round table at the ongoing New Global Financial Pact Summit in Paris, with President Emmanuel Macron of France, IMF Managing Director Kristalina Georgieva and President of the World Bank Group Ajay Banga.
The President, who recently decried the mistreatment of African leaders, has also joined those calling for an end to the use of dollars in cross-border trading.
“That is the organisation we are looking for. And that is why we are saying, we need a new financial architecture where governance, where power is not in the hands of a few people,” said Ruto.
Critics of the current global financial system have argued that the rich countries, led by the United States, have been able to set the rules of international trade and finance through the IMF, World Bank and other Bretton Woods institutions such as the World Trade Organisation.
The leaders of the World Bank and the IMF are not elected but are nominated by the US and Europe. It also appears, as an unspoken agreement, the president of the World Bank has always been from the US (or nominated by the US), while the president of the IMF has always been European.
“The US has de facto veto power over all significant decisions, and together with the rest of the G7 and the European Union controls well over half of the vote in both agencies. Middle- and low-income countries, which together constitute 85 percent of the world’s population, have a minority share,” said Jason Hickel, Professor at the Institute for Environmental Science and Technology and Fellow of the Royal Society of Arts, in a 2020 commentary.
The World Bank and the IMF are Kenya’s largest lenders, and their influence in determining Kenya’s fiscal path grew after the Covid-19 pandemic in 2020.
Read: IMF, World Bank fingerprints on Kenya’s $26bn Budget
The Covid-19 pandemic and the uncertainties that ensued triggered a reshuffle in Kenya’s debt mix, with China’s portion lagging behind that of the two multilateral institutions.
Together, the two multilateral institutions have forked out billions of ‘rescue loans’ to Kenya, pushing their share of debt to Ksh1.65 trillion by the end of March.
These loans have, however, come with conditions, such as increasing taxes and reducing spending.