IMF Urges Ruto to Persist with New Taxes Amidst Protests
The International Monetary Fund (IMF) has advised the administration of President William Ruto to maintain its stance on the new tax measures despite growing opposition protests.
In its Risk Assessment Matrix detailed in the Country Report for July 2023, the IMF predicted the emergence of protests over the high cost of living, which was one of the main points of the protest led by Former Prime Minister Raila Odinga.
The risk was rated as moderate, which indicates that the multilateral lender does not view the ongoing protests as a threat to the President’s plans.
“Unrest could reemerge in connection with protests against the higher cost of living, the need to raise more taxes, and an electoral process supported by the political opposition,” the IMF predicted.
The IMF has advised the country to “Remain committed to reforms under the program” despite mounting pressure from various groups, including the Catholic Church, for the repeal of the Finance Act.
Among the measures contained in the Finance Act 2023 are the introduction of the 1.5% Housing Fund and the increase of the VAT on fuel products from 8% to 16%, which could lead to an increase in the price of most essential goods.
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Despite a court order suspending the implementation, the Energy and Petroleum Regulatory Authority (EPRA) has already increased the price of Super Petrol and Diesel by Ksh13.
Currently, Super Petrol costs Ksh195.53 per liter, while Diesel costs Ksh179.67 per liter.
In its review, the IMF asserts that the price of fundamental commodities could increase due to additional global factors.
“Maintain domestic fuel prices at parity with international fuel prices while reducing expenditures to mitigate fiscal pressures. If the disruption persists, the IMF advises tightening monetary policy to ensure inflationary expectations remain well-anchored.
The U.S.-based lender has advised Ruto to continue with the reforms despite the predicted difficulties.
The financial institution stated, “Risks from poor implementation capacity of the new government initiatives would lead to higher budget deficits, which would increase debt ratios, discourage private investment, and ultimately weaken growth.”
Ruto recently attacked Western financiers, advocating for a Pan-African agenda that seeks solutions from within the continent.
Nevertheless, the IMF directive reveals that some of the statements are merely political rhetoric.
IMF Urges Ruto to Persist with New Taxes Amidst Protests
