The International Monetary Fund (IMF) has approved Kenya’s recent tax policy on vital commodities and services such as cooking gas and bank loan fees, claiming that the extra money received has helped to offset increasing fuel and fertiliser costs in the aftermath of the Ukraine crisis.
“Important tax policy initiatives” have resulted in “excellent” tax revenues this fiscal year, according to the IMF’s latest analysis of Kenya’s economy.
A 16 percent charge on cooking gas, a 20 percent excise duty on airtime and data (up from 15 percent), a 20 percent duty on fees and commissions made on loans, and a 7.5 percent tax on gaming profits are among the taxing measures.
“Kenya’s fiscal position has been bolstered by strong tax revenue performance this year, buoyed by a robust economic recovery and important tax policy measures already implemented as part of a multi-year plan to reduce debt-related vulnerabilities,” IMF Mission Chief to Kenya Mary Goodman said in a statement following the review, which took place between March 31 and April 22.
“These resources provide resilience, allowing the authorities to cushion some of the impact of the substantial increase in global energy and fertiliser costs on people and companies while still meeting budgetary objectives for FY2021/22.”
After supplies from Russia were cut off due to sanctions, the Treasury has provided KSh5.7 billion in fertiliser subsidies to small-scale farmers for the present major crop planting season, with another KSh1.5 billion set aside for the October-December short-rainfall period.
The Kenyan Treasury had disbursed KSh49.164 billion by April 14 under a pump price stabilisation programme that began in April last year to lower the price of a vital commodity whose cost has been increased by Russia’s war in Ukraine.
“Spillovers from the Ukraine conflict are projected to have a minor impact on growth in the near term,” Ms Goodman said, noting that Kenya’s direct exposure to Russia and Ukraine is small.
The crisis in Ukraine would not have a big impact on Kenya, according to Central Bank of Kenya governor Patrick Njoroge, noting the low value of imports from the fighting eastern European nations.
Russia, the CBK chief said, accounted for 1.8 percent (KSh38.64 billion) of Kenya’s nearly Sh2.15 trillion import bill last year — comprising wheat (Sh17 billion), iron & steel (KSh9.67 billion), fertiliser (KSh6.57 billion) and others (KSh5.41 billion).