The International Monetary Fund (IMF) has revealed its stand on the impact of President William Ruto's hiked taxes enshrined in the Finance Act 2023.
In a document released by IMF this January, the financial body stated that it empathises with Kenyans who have been financially affected by the new taxes.
It also acknowledged that the majority of the local citizens are not pleased with the tax measures that have seen the cost of living rise amid a weakening shilling.
"We empathise with the very difficult economic conditions facing the people of Kenya, and we were deeply saddened that some protests became violent," IMF referred to the ripple effect created by Ruto's fiscal policies including demonstrations led by opposition leader Raila Odinga.
"The discontent reflected existing concerns about the rising cost of living, alongside efforts to remove fuel subsidies and increase in the electricity tariff," added the report in part.
However, the IMF backed Ruto, insisting that the tax revenue measures were necessary to address some of the fiscal challenges facing the country.
Specifically, the IMF highlighted that the policies were aimed at addressing debt vulnerabilities with Kenya's domestic loan hitting Ksh5 trillion for the first time in history. The overall debt stood at Ksh11 trillion as of December last year.
Kenya recently paid China's Ksh72 billion loan for the Standard Gauge Railway (SGR)and is grappling to offset the Ksh312.1 billion Eurobond set to mature in June this year.
Nonetheless, it was noted that the government had adopted some relief measures to help Kenyans.
'The FY2023/24 Budget and 2023 Finance Act go a long way to reduce Kenya’s debt vulnerabilities but there are tradeoffs. These are compounded by the challenging external environment, including tighter financing conditions and volatile international commodity prices.
"These tradeoffs can be mitigated by protecting and enhancing social and development expenditures. In this regard, the authorities’ social initiatives, including the Financial Inclusion Fund (Hustler Fund), affordable housing, and the expansion of water infrastructure respond to these social needs," read the statement in part.
New tax measures were introduced in the Finance Act 2023 by the Ruto administration to raise finances to fund government projects and programs.
Among new measures that were introduced include the 1.5 per cent Housing Levy and 16 per cent VAT on fuel products among others.
Additionally, rates for pension and health insurance have been raised for salaried Kenyans. Charges for government services have also seen a rise in the last year.
All these changes have made Kenyans earn less amidst an increase in the cost of living. Notably, a report by research firm Infortrak, revealed that over 70 per cent of Kenyans were struggling to make ends meet.
