Kenya/IMF: Aligning economic reforms with human rights

(Nairobi) Kenya The government and the International Monetary Fund should work together to ensure that the IMF program and its implementation are consistent with human rights, Human Rights Watch said today. The focus should be on gradually increasing revenues and accountability for public funds.

Following recent nationwide protests, President William Ruto has refused to sign the 2024 Finance Bill, which includes regressive tax measures that could undermine rights. Any replacement measures should ease economic pressures by addressing the root causes of protesters’ anger.

“In a country where corporate tax evasion is widespread, the widespread anger over proposed taxes on goods such as sanitary napkins and cooking oil should serve as a wake-up call to the Kenyan government and the IMF that they cannot sacrifice human rights in the name of economic recovery,” he said. Sarah SaadonSenior researcher on poverty and inequality at Human Rights Watch. “Economic sustainability can only be achieved through a new social contract that raises incomes equitably, manages them responsibly, and finances services and programs that enable everyone to realize their rights.”

Finance Bill 2024In the context of the IMF program Kenyaexpected Raised $2.7 billion The bill includes several new tax provisions, such as the elimination of tax exemptions on certain food products and a levy on mobile remittances, which will increase the cost of basic goods and services, hitting Kenyans with low and middle incomes and already marginalized groups the hardest, such as female.

this IMF Program Approved in 2021 to support Kenya in its response to the COVID-19 pandemic and global inflation, as well as devastating drought and flood Climate change is making the situation worse. Rising interest rates are also forcing governments to spend as much as Half of the tax revenue repay loan.

Human Rights Watch said Kenya’s government had other options to gradually increase tax revenue and strengthen trust in government. Kenya’s tax revenue as a percentage of GDP is about 2.3 billion. 15%which is the minimum threshold According to data from the World Bank To achieve national survival and economic stability.

Governments can pursue tax reforms to better enforce existing tax rules, address mismanagement and corruption, and increase taxes on the wealthy. Taxes on industries or products that harm the environment should also be designed to not undermine rights, for example by using revenue from levies to compensate for the impact on low- and middle-income groups.

Under human rights law, governments and the institutions that support them must do everything possible to protect and promote human rights in response to economic crises. They should conduct and publish human rights impact assessments to ensure that proposed reforms, including fiscal policy and public spending reforms, maximize the realization of people’s economic, social and cultural rights, with special attention to risks faced by women and economically marginalized groups. These assessments should be transparent, include public participation, and influence the measures that are ultimately implemented.

The International Monetary Fund has pledged $4.4 billion Kenya and the World Bank Estimated USD 12 billion The aid will be provided between 2024 and 2026. However, the plan negotiated with the International Monetary Fund calls for deep spending cuts and increased revenues. IMF Statement The Finance Bill and the budget proposals for the upcoming fiscal year were praised as being in line with the required “massive and upfront fiscal consolidation”, referring to reducing public spending or raising revenue.

Human Rights Watch analyze Studies of such measures show that they often undermine human rights. They also show that they tend to increase inequality and that “large upfront fiscal consolidation can be particularly damaging”. According to the Independent Evaluation Officean independent IMF entity.

The IMF program in Kenya has introduced sweeping reforms, some of which Aggravation The measures included doubling the VAT on fuel without any compensatory measures, and other efforts to raise revenue, which led to fiscal difficulties. However, the public benefited little from the additional revenue, and the government still failed to meet IMF targets.

The IMF statement recommended strengthening so-called “social safety nets” – social protection programs that provide income support – while also expressing support for the approved budget. Analysis Submitted According to a report submitted to the National Assembly’s Budget and Appropriations Committee by Bajeti Hub, a non-governmental organization formerly known as International Budget Partnership Kenya that advocates for budget transparency, the budget presented to Parliament in April made significant cuts to spending on health, education, social protection, and water and sanitation. Combined spending in these categories stands at $1.2 billion for 2022/23. Only about 6% This represents 23% of Kenya’s GDP, or 23% of government spending. This amount is well below international benchmarks and reflects a continued decline in social spending in Kenya since 2019.

For health care, the World Health Organization suggestion spend at least 5% of GDP, while Kenya agree At least 15% of government spending. Benchmarks In the area of ​​education, it is recommended that at least 4 to 6 per cent of GDP or 15 to 20 per cent of the national budget be allocated to fulfilling human rights obligations.

Anger over the bill sparked unprecedented protests across the country and online, which quickly evolved into widespread outrage over the high cost of living, corruption, poor governance, government waste and poor public services. Protesters said they were particularly angry that the government was imposing taxes on sanitary napkins, cooking oil and other basic goods instead of addressing rampant tax evasion and corruption.

Government response Brutal repression It is reported that protesters were attacked, resulting in at least 39 deaths Kenya Police Reform Task ForceAuthorities continued to arbitrarily arrest and detain protesters and those believed to be organizers of protests. At least 32 caseskidnapping and enforced disappearance. Kidnapping victimsReporting torture Police or suspected government personnel and others Found dead.

President Ruto sent the bill back to parliament, saying he would seek $1.4 billion in spending cuts and $1.3 billion in new borrowing. It may be a positive move against regressive tax measures, but protesters say it does little to address the root causes of the country’s problems or heed public demands for reform.

In addition, Human Rights Watch said it could create new risks to human rights. The president has said he will achieve the cuts by reducing travel expenses and eliminating the budgets for the spouses of the president and vice president, but this is unlikely to be enough. To achieve the $1.4 billion reduction target, the government may have to further reduce – or at least not increase – long-sluggish social spending. Revised Budget The bill was published on July 15 but has yet to be analyzed. Meanwhile, without the fiscal bill, the IMF’s executive board may not approve the release of additional funds.

The IMF should review its objectives to ensure that they do not hinder the Kenyan government from meeting its human rights obligations and that any policies enacted to achieve program objectives do not exacerbate poverty and inequality or undermine rights. To build trust, the IMF and the Kenyan government should work together to conduct and publish human rights impact assessments of the budget and finance bills, and amend them to best meet their rights obligations, Human Rights Watch said.

The United Nations Committee on Economic, Social and Cultural Rights stated in its 2016 report Regular review Kenya “suffers from large illicit financial flows and tax avoidance” and “cases of corruption, especially involving senior officials, are not thoroughly investigated.”

In addition, the NGO Tax Justice Network ranked Kenya highly accomplice It helps multinational corporations pay less corporate income tax and says Kenya loses $190 million a year to global tax fraud, much of it by multinational corporations. This figure is equivalent to 9.5% of Kenya’s health budget and 4% of its education budget. Tax compliance rate According to the Kenya Revenue Authority, this proportion will reach 70% by 2023.

Human rights law also requires other countries and public institutions to create a global environment and provide support to Kenya to maximize the realization of the economic, social and cultural rights of everyone in the country. This applies, for example, to global tax rules and debt treatment.

The United Nations High Commissioner for Human Rights called onHuman Rights Economy“This concept is rooted in a shared vision of reforming domestic economies and the international financial architecture to enable everyone to realize their economic, social and cultural rights, as well as their rights to development and to a healthy and sustainable environment.

“Kenyans are expressing the anger of billions around the world who are being crushed by an economic system that leaves little room for even well-intentioned governments to meet their human rights obligations,” Saadon said. “Only by combining economic policy with human rights at every level, domestically and internationally, can we address the root causes of the problem.”