This archive report was first published on 17 June 2020.
IMF's Influence in Kenya's Budget Raises Concerns ¶
On June 17, 2020, Treasury Cabinet Secretary Ukur Yatani presented the budget, which included IMF-backed tax reversals that have sparked debate.
Kenya has a history of IMF budgetary interventions, dating back to the 1990s when President Moi sought IMF support due to corruption and economic woes. The IMF prescribed structural reforms, some of which have had negative impacts on the country.
However, in the early 2000s, President Kibaki successfully avoided IMF involvement through budgetary discipline and alternative bilateral development support from China. The current government has now turned to the IMF, citing Chinese and commercial debt burdens.
Three tax exemption reversals announced in the budget have been met with criticism. The re-introduction of taxes on pensions for retirees aged 65 and above is seen as morally incorrect, as these individuals face significant medical expenses and cannot engage in side hustles.
The reversal of tax exemptions on keg beer, made from locally farmed sorghum, is also contentious. This tax reversal aims to provide affordable liquor to low-income citizens and support the sorghum value chain, which creates jobs and increases household incomes.
The re-introduction of VAT on LPG is another point of debate. While the Treasury may argue that taxing LPG is necessary, it is suggested that the small six-kilo package should be spared, as it targets lower-income populations.
Cabinet Secretary Yattani has been praised for tidying up the Treasury and budgetary processes, but he now needs to question the IMF's tax prescriptions, particularly those affecting senior retirees' pensions.
