IMF recommends Ruto to retain new taxes despite protest
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IMF in its Risk Assessment Matrix advices Ruto to retain new taxes in the Finance Act 2023 despite protest
IMF in its Risk Assessment Matrix advices Ruto to retain new taxes in the Finance Act 2023 despite protest.
In the face of escalating opposition demonstrations, the International Monetary Fund (IMF) has recommended President William Ruto’s administration to maintain its position on the new tax policies.
The IMF forecasted In its Risk Assessment Matrix detailed in the Country Report for July 2023, predicted the emergence of protests over the high cost of living.
The risk was rated as medium, which indicates that the multilateral lender does not view the current protests as posing 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 electoral the process supported by the political opposition,” IMF analyzed.
Despite increasing calls for the government to repeal the Finance Act from various organizations, including the Catholic Church, the IMF has recommended the country to “Remain committed to reforms under the program.”
The implementation of the 1.5% Housing Fund and the raising of the VAT on fuel goods from 8% to 16% are two measures included in the Finance Act 2023 that could result in an increase in the cost of the majority of essential commodities.
The IMF maintains in its review that the price of basic commodities could shoot up also owing to other global factors.
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“Keep domestic fuel prices aligned with global fuel prices while compressing expenditure to contain fiscal pressures. If the shock is persistent, tighten monetary policy to ensure inflationary expectations remain well-anchored,” IMF advised.
The US-based lender has advised Ruto to stick to the reforms despite a mirage of challenges predicted.
“Risks from poor implementation capacity from the new government initiatives would lead to higher budget deficits, which would increase debt ratios, crowd out private investment, and ultimately weaken growth,” the financial institution stated.
Ruto recently took aim at lenders from the West, pushing for a Pan-African agenda that would look for solutions from within the continent.
However, the IMF directive reveals that some of the pronouncements are political rhetoric.
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