The IMF has asked the Ruto administration to stick to its taxation measures and not be moved by the street protests.
The lender, in the document made public on Wednesday when the new wave of protests started, classifies the likelihood of political risk as ‘medium’ and also notes that in the case the risk crystallises, the impact on the economy will be ‘medium.’
“Unrest could reemerge in connection with protests against the higher cost of living, need to raise more taxes and electoral process supported by the political opposition,” says the IMF, adding that the policy response by the government should be to “remain committed to reforms under the program.”
The Kenya Revenue Authority (KRA) last week said it had raised Sh2.166 trillion in the financial year ended June against a target of Sh2.273 trillion, translating to a Sh107 billion shortfall.
This could tempt the Treasury to come up with tax measures to enhance the chances of the taxman hitting the target in the current financial year.
The IMF says in its latest review that Kenya has met the conditions that warranted approving about $1 billion (Sh141.8 billion) financing and should not compromise on the agreed stance that includes the removal of subsidies and rolling out new taxes to cut the country’s reliance on debt.
Kenya got a $415 million (Sh58.8 billion) disbursement under the extended fund facility and expanded credit facility, programmes designed to support the economy and also boost its foreign exchange reserves.
The IMF fifth review also gave Kenya $551 million (Sh78.13 billion) as part of the resilience of a 20-month arrangement under the resilience and sustainability facility.
IMF disclosures reflect the stance that has been taken by the Kenya Kwanza administration, which has vowed to go ahead with its taxation measures such as a 1.5 percent housing levy on workers’ gross pay and the doubling of valued added tax on petroleum products to 16 percent, as contained in the now suspended Finance Act 2023.
The suspended Act also increased the turnover tax on small and medium enterprises from one percent to three percent and introduced a digital asset tax.
