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IMF Economist Reveals Cause of Kenya’s Heavy Tax Burden

Economic expert blames unrealistic revenue targets imposed by the IMF in exchange for loans

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Mr Peter Doyle, a former senior economist at the International Monetary Fund (IMF) has said Kenyans are facing a heavy tax burden due to unrealistic revenue targets imposed by the IMF in exchange for loans to the country.

Mr Doyle, who left the IMF in 2012 after 20 years and is now an independent research economist specializing in international macroeconomics, highlighted at a recent conference on Africa’s debt crisis that citizens in Kenya are bearing the brunt of new taxes as the country strives to avoid defaulting on its debts.

Mr Doyle pointed out that the IMF has been steadily increasing the medium-term primary balance target that Kenya must achieve, leading to a continuous rise in taxes for Kenyans.

He made these remarks during a conference titled “The African Debt Crisis and International Financial Architecture,” held in Accra, Ghana and organized by Economics under the International Development Economics Associates Limited (IDEAs).

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The primary balance refers to the variance between the government’s revenue and its expenditures, excluding debt payments. According to Kenya’s Treasury data, Kenya anticipates ending the financial year in June 2024 with a deficit of Ksh832.3 billion, equivalent to 5.2% of GDP.

In the fiscal year 2024–2025, the Kenya government hopes to cut this deficit to Ksh753.2 billion (4.2% of GDP), and the following year, to Ksh719.9 billion (3.6% of GDP).

In response to the financial challenges, Kenya introduced several new taxes in July 2023, including a doubling of the value-added tax on fuel and the implementation of a 1.5% housing levy on gross pay. The government is also intensifying efforts to bring the informal sector into the tax net in a bid to boost revenue collection.

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STEVE WAMBUGU
STEVE WAMBUGU
Steve Wambugu is a journalist based in Nairobi.
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