The International Monetary Fund(IMF) is pushing for fuel tax hike as part of the conditions for issuing a Ksh257 billion loan to Kenya.
In a statement released yesterday, April 7, 2021, the multilateral lender told the President Uhuru Kenyatta administration to revert back to the 16 per cent Value Added Tax on fuel which had been cut back previously.
This the IMF says would boost revenue collection for the government.
File image of the IMF buildings.| Photo| Courtesy|
President Kenyatta halved the VAT on fuel to 8 per cent after the introduction of the fuel tax elicited protests from motorists and business lobbies.
The fuel tax was introduced in a law signed in 2013, but has often been procrastinated due to complaints and protests from the public.
IMF made the demand at a time when it is required to play a key role in shaping policy to aid the government in implementing strict measures across various sectors.
"If needed to meet fiscal objectives, capitalise on lower fuel prices by aligning fuel VAT to the standard rate," IMF told the government.
"Oversupply and volatility in the oil markets would be a positive shock for Kenya, easing potential external balance pressures from other sources," IMF adds.
The advisories by IMF follow the Ksh257 billion it approved to Kenya will be pumped into the budget.
The push to increase fuel levies, however, comes at a time when Petrol is selling at a price last seen in November 2011 and Diesel retailing at its highest since December 2018.
Attendant fuels a vehicle at a filling station.| Photo| Courtesy|