Recent protests against Kenya’s Finance Bill (2024) have spotlighted the contentious nature of the International Monetary Fund’s (IMF) policy advice in Africa. ActionAid, a leading international non-governmental organization, has criticized the IMF’s recommendation for Kenya to increase taxes on essential goods and services as part of a debt repayment strategy, labeling it as another instance of the Fund’s failed policies.
The proposed tax increases come amid Kenya’s mounting public debt, which has surged to over 68% of its Gross Domestic Product (GDP), coupled with soaring inflation rates. The IMF’s advice to prioritize debt repayment over the provision of basic needs and development programs has left the most vulnerable populations grappling with an exceedingly high cost of living.
These tax hikes are happening alongside significant budget cuts, averaging 11%, in critical sectors such as education, research, social protection, disaster response, and agriculture. The Kenyan government’s plan to further tax sectors that are crucial for gender-responsive public services, like education, water, and health, has raised concerns. Moreover, a moratorium on employment for teachers and medical personnel is exacerbating challenges in the education and health sectors.
“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, Programs and Strategy Lead at ActionAid International Kenya.
The Kenyan government aimed to raise USD 2.7 billion through these new taxes. The proposed levies include a tax on bread, a 2.5% motor vehicle tax, taxes on income from digital content, betting, gaming, and lotteries, as well as taxes on imported sanitary towels and diapers. Additionally, taxes were proposed on money transfers, bank charges, manufacturing and construction industry goods, and goods supplied to public entities.
ActionAid has called for the IMF to reassess its Debt Sustainability analysis, suggesting it should include a government’s ability to pay for basic social needs, such as public health and education, before servicing debts. Roos Saalbrink, Economic Justice Lead for ActionAid International, emphasized the detrimental impact of the IMF’s policies.
“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,” said Saalbrink.
She further criticized the IMF’s insistence on cutting spending on essential services, which often affects healthcare, education, and social safety nets, disproportionately harming the poorest and most marginalized communities. This creates a vicious cycle where struggling economies are unable to invest in the very things needed for prosperity.
“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 prioritize and promote long-term economic development over its short-term policy measures,” Saalbrink concluded.
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