Kenya's ill-advised tax increases illustrate IMF's failed policies, ActionAid says

The recent protests in Kenya against the Finance Bill (2024) show the shortcomings of the International Monetary Fund’s policy advice in Africa, ActionAid says. The Fund advised Kenya to raise taxes for essential goods and services as part of a debt repayment strategy. 

The proposed tax increases came against the backdrop of a ballooning public debt reaching over 68% of GDP and high inflation rates. Advising the Kenyan government to prioritise debt repayment through tax hikes over basic needs, development, and social programs has exposed the most vulnerable to an extremely high cost of living. 

“It is unfortunate that the IMF has learned nothing from its past failed policy advice to governments in Africa, dating back to the structural adjustment programmes in the ‘80s. Raising taxes to service debt instead of addressing bread-and-butter issues is a recipe for disaster and one whip too many on the backs of Kenyans, who continue to tighten their belts and bear the burden of the government’s austerity measures. This latest fallout should serve as a pivotal moment for the IMF’s dealings with Global South countries,” said Samson Orao, the Programs and Strategy Lead at ActionAid International Kenya.

The Kenyan government had planned to raise USD 2.7 billion from additional taxes. These included levies on bread, a 2.5% motor vehicle tax, tax on income from digital content, tax on betting, gaming, and lotteries, tax on imported sanitary towels and diapers, tax on money transfers and bank charges, tax on manufacturing and construction industry goods, tax on goods supplied to public entities and so on.

Kenya is witnessing significant budget reductions averaging 11% in critical sectors such as education, research, social protection, disaster response, and agriculture.  It is quite perplexing that the Kenyan government would propose further taxation on sectors that affect gender-responsive public services like education, water, and health. The moratorium on employment for teachers and medical personnel is a challenge to the education and health sectors respectively.  

The IMF needs to urgently assess its debt sustainability analysis to include a government's ability to pay for the provision of basic social needs, including public health and education, before paying back debts.

Roos Saalbrink, the Economic Justice Lead for ActionAid International, said:

“It is absurd that the IMF continues to be obsessed with its colonial policies enabling extraction of resources from the Global South and clearly have not helped these countries. The IMF is pushing the interests of its global north-dominated board to facilitate debt collection regardless of the implications for people in borrowing nations. The advised tax raises have only served to burden the poor further with the additional funds going towards debt repayment and not development.” 

“The IMF's insistence on cutting spending on essential services often comes at the expense of healthcare, education, and social safety nets, harming the poorest, most marginalized disproportionately. This creates a vicious cycle, where struggling economies are unable to invest in the very things they need to prosper." 

"The impact of these policies in Kenya shows that a one-size-fits-all approach simply doesn't work. The IMF must change its approach to prioritise and promote long-term economic development over its short-term policy measures.” 

Contact the ActionAid press office at [email protected] or at +263776665065.