Former senior economic advisor to the President, Moses Kuria, has warned that the current cut on Value Added Tax (VAT) may worsen the crisis facing the country’s fuel prices.
According to Kuria, the cut of the VAT from 16 % to 8 % by the government was a political move that will affect the economic growth of Kenya, which he does not support.
“I think now that the recent one, where they decreased from 16 to 8 (%), for me, is more of political expediency. I disagreed with that, and I said it publicly because it is like taking Piriton instead of surgery. You know, this problem is temporary,” Moses Kuria commented during an interview with Citizen TV.
He explained that the VAT had been increased from 8% to 16% because the books were not balanced.
In his submission, Kuria revealed that the VAT increment to 16% was also a result of the pressure from the International Monetary Fund (IMF) on the financial imbalances.
According to Moses Kuria, the decline in the VAT offers the country a temporary solution only to an ongoing crisis that needs permanent measures.
The government, he argued, was supposed to leave the fundamentals as they were rather than implement the current changes.
Citing the country’s performance on inflation, import cover, reserves, and the currency maintaining a consistent value of 129 since January 2024, Kuria argued that the changes were therefore uncalled for.
Additionally, Kuria suggested that the implementations by the government were made in the rush. Instead, the government would have waited to find a better solution, rather than the parliament taking short-term expediency measures driven by politics.
“So I would have wished if I were to be asked that we, you know, bite the bullet for a few months and see how it goes. But be as it may, parliament in its wisdom decided to, you know, take some short-term expediency measures, maybe driven by the fear of politics,” Kuria added.
Also Read: Govt Details How Monthly Fuel Prices Are Determined in Kenya
Moses Kuria on Kenya’s Economy
According to Kuria, Kenya will continue to experience economic instability and fuel price hikes due to the current government’s implementation of solutions to the global economic threat facing Kenya.
Additionally, the high consumption rate in Kenya, compared to other countries such as Uganda, which is currently consuming its December stock, continues to play a major part in the hike in fuel prices.
Low fuel consumption in Uganda and the use of December pricing, according to Kuria, are what separate fuel prices between Kenya and Uganda.
Kuria, however, noted that despite the two countries having a huge difference in the fuel prices globally, the price of crude oil had indeed skyrocketed.
Also Read: Senator Reveals Why Kenya’s High Fuel Price Is Beneficial to the Economy
Middle East Conflict Economic Disruption
Ongoing conflict in the Middle East region, leading to the disruption of the Strait of Hormuz trading route, has led to vessels finding alternative routes that are costly and take longer to make deliveries, as explained by Moses Kuria.
Referring to his tour in Jeddah, Saudi Arabia, two weeks ago, Kuria explained that the detour routes taken by vessels to avoid the Strait of Hormuz are like traveling the entire distance around the world.
Similarly, he stated that the detour is occurring in Africa, where ships have to deviate from the Indian Ocean.
Kuria clarified that, despite some major companies shipping oil from countries such as Venezuela, the fuel price hike was a global problem and that fuel price hikes are expected in the future.
