WASHINGTON, D.C., United States — The International Monetary Fund (IMF) has weighed in on Kenya’s decision to reduce Value Added Tax (VAT) on fuel from 13 P.c to 8 P.c, describing it as part of a broader global trend where governments are adopting mixed fiscal strategies to cushion their economies.
Speaking at the IMF Spring Meetings, Era Dabla-Norris said countries are increasingly deploying a range of measures—including tax cuts, spending adjustments, and pricing controls—to respond to economic pressures.
“We are tracking what countries are doing around the world… and what we see is that countries are really adopting a wide range of measures,” she said.
“Some are adopting revenue-based measures, so cuts in VAT or excises. Others are doing spending-based measures, yet others are doing pricing measures.”
Kenya’s VAT reduction comes amid sustained public pressure over the high cost of living, particularly fuel prices, which have remained volatile in recent months.
However, the IMF cautioned that it is still too early to determine the fiscal impact of such interventions, noting that governments appear more restrained compared to past global shocks.
“While it’s too early to determine what the fiscal costs of these measures are, what is becoming clear is that the response so far has been much more restrained than… the 2022 energy price shock,” Dabla-Norris said, attributing the cautious approach to uncertainty in the global economic outlook.
The VAT adjustment has already had a direct impact on pump prices. In its latest review, the Energy and Petroleum Regulatory Authority (EPRA) announced price reductions effective April 16 to May 14, 2026.
In Nairobi, super petrol and diesel prices dropped by Sh9.37 and Sh10.21 per litre respectively, bringing retail prices to Sh197.60 for petrol and Sh196.63 for diesel, while kerosene remained at Sh152.78 per litre.
EPRA also indicated that the kerosene subsidy had been reduced from Sh108.10 to Sh96.56 per litre.
The developments come against a backdrop of mounting political pressure on the government of William Ruto to address the rising cost of fuel and broader economic strain.
Opposition leaders, led by former Deputy President Rigathi Gachagua, have issued a seven-day ultimatum demanding urgent measures, including the scrapping of the government-to-government (G-to-G) fuel import arrangement.
“President William Ruto, you must immediately instruct the National Assembly Speaker to convene a special sitting to scrap G-to-G,” Gachagua said during a press briefing.
The opposition also called for the reduction or removal of fuel-related taxes such as VAT and the road maintenance levy, as well as the suspension of deductions like the Affordable Housing Levy and National Social Security Fund (NSSF) contributions.
They argued that these measures are necessary to ease the financial burden on households following recent fuel price increases that had pushed pump prices above Sh200 per litre before the latest review.
Gachagua warned that failure to act within the stipulated timeline would trigger nationwide protests.
The IMF’s remarks suggest that while Kenya’s VAT cut aligns with global responses, its long-term sustainability will depend on how the government manages revenue gaps and evolving economic risks.
