Treasury Cabinet Secretary Njuguna Ndung'u on Thursday read his first Budget speech that had fingerprints of the International Monetary Fund (IMF) and the World Bank, a signal that President William Ruto is keen to implement the stringent conditions that came with loans from the Bretton Woods institutions.
The 129-page Budget speech sought to explain the motivation behind the far-reaching revenue-raising plan that will see the State adopt various policies from the two Washington-based institutions that Kenya agreed to implement, including increasing value-added tax (VAT) on fuel to 16 percent.
Also, various items were removed from the zero-rating list, which means they will start being charged the 16 percent sales tax, a measure that has always been favoured by the World Bank.
Dr Ruto, whose first task after ascending to power was to phase out fuel subsidies in line with IMF’s conditions, has refused to back down on the proposal to increase VAT on petroleum products despite its widespread popularity.
“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 programmes, 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.”
The government expects to collect an additional Ksh50 billion ($357.14 million) from the eight percent VAT on fuel, helping it narrow the budget deficit to 4.4 percent of gross domestic product (GDP) as it had promised the IMF.