See how Kenya’s $26 billion budget was influenced by the IMF and World Bank
- The recent Budget speech by Njuguna Ndung’u reflects Kenya’s commitment to implementing the strict conditions imposed by the IMF and World Bank as part of their loan agreements.
- Despite facing opposition, President Ruto remains firm on imposing VAT on petroleum goods. Gradually eliminating gasoline subsidies is a key requirement from the IMF.
- The Treasury Cabinet Secretary acknowledges the support provided by various development partners, including the World Bank, IMF, European Union, African Development Bank, and bilateral donors.
Influence of the International Monetary Fund (IMF) and the World Bank were clearly present in Kenya’s Treasury Cabinet Secretary Njuguna Ndung’u’s first Budget speech on Thursday, a sign that President William Ruto is eager to put into practice the strict conditions that came with loans from the Bretton Woods institutions.
The 129-page Budget address aimed to explain the rationale behind the expansive revenue-raising scheme that would see the State accept a number of regulations from the two Washington-based organizations that Kenya committed to following, including hiking the value-added tax (VAT) on petrol to 16%.
Additionally, a number of commodities were taken off the zero-rating list, which means they would now be subject to the 16 percent sales tax, a policy the World Bank has long supported.
Dr. Ruto has refused to back down on the idea to impose VAT on petroleum goods despite it enjoying broad support. His first priority after taking office was to gradually eliminate gasoline subsidies in accordance with IMF requirements.
“Mr. Speaker, we are truly grateful as a nation to our development partners who have over the years provided financial resources to support the implementation of government programs, policy, and structural reforms,” said Prof Ndung’u in his speech that put the country’s total spending at Ksh3.68 trillion ($26.28 billion) for the fiscal year ending June 2024.
“In particular, allow me to single out the multilateral institutions, specifically the World Bank, the International Monetary Fund (IMF), the European Union, the African Development Bank, and the many bilateral donors, institutions, and governments that have walked the journey of socio-economic transformation with Kenya,” he added.
The 8% gasoline VAT is expected to bring in an additional Ksh50 billion ($357.14 million), enabling the government to meet its commitment to the IMF to reduce the budget deficit to 4.4% of GDP.
