More IMF loans to blame for rise in fuel prices

All Kenyans’ eyes will be trained on President Uhuru Kenyatta on whether he will sign the Finance Bill 2018 after he jets back from China.

The Bill contains ammendments which seek to suspend the effecting of the 16% VAT tax on petroleum products amid public outage on the matter.

MPs have threatened to impeach Treasury Cabinet Secretary Henry Rotich after the Finance Bill 2013 came into effect on September 1. It had previously been deferred twice, first in 2013 and in 2016.

As it stands, Nairobi motorists will now pay Ksh128 for super petrol up from Ksh112, Ksh115 for diesel up from Ksh102 and Ksh97 for kerosene up from Ksh84.

The situation is the same across the country only that the price margins differ slightly.

IMF

How did we get here as a country?

The government has been under pressure to raise revenue to finance its budget amid a shortfall in collection by the taxman.

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In 2015, the government entered an agreement with the International Monetary Fund (IMF) to raise funds internally after the institution raised the red flag over the government’s borrowing appetite.

In order for IMF to advance other loans to the country, the government has to raise money internally by effecting the VAT on petroleum products.

According to David Ndii an economist, the government is seeking to raise Ksh70 billion. Ndii says this is unlikely through taxation as the government cannot raise more than 30 billion from taxing petroleum products.

Political debate

On September 2, the issue was subjected to heated debate with political leaders across the country warning that they would not be privy to making the lives of poor Kenyans more unbearable.

Deputy President William Ruto chose a more diplomatic tone saying that the Executive would engage Parliament in order to come up with a solution that did not entail transferring the burden to Wanjiku.

“The executive will sit down with parliamentarians to ensure that the common man does not suffer because of the law,” said DP Ruto.

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Orange Democratic Party leader Raila Odinga assured Kenyans that President Kenyatta will assent to the amendments made by MPs to the Finance Bill 2018.

“Members of Parliament already made amendments to the bill and removed the 16% V.A.T, President Kenyatta will intervene very soon,” said Mr. Odinga.

MPs however were unapologetic over their resolve to ensure that effecting of the 2013 bill is reversed.

“As parliament we will remain firm by saying that no tax will be imposed on petroleum products because that money will not benefit the common man but rather will be used to pay debts that were taken without proper consultations,” said former Cherengany MP Joshua Kutuny.

Belgut MP Nelson Koech wants MPs called back from recess to discuss the bill with the general feeling being that the government ought not to tax Kenyans to service debts which it is responsibile for.

“There is a reason why the VAT act 2013 has continually been suspended by parliament it is for that reason that I would like to urge parliament to reconvene and agree with the executive on the way forward,” said Koech.

Interestingly the rise in the prices of fuel comes at a time when Kenya’s inflation is relatively low at 4.04% as of August 2018 down from 4.35 % in July.