There is something that is being lost in this fuel VAT saga. While imposing VAT on fuel will have serious economic consequences the tragedy is failing to do so will have even worse economic consequences.
As can be seen from the chart below, the government seeks to raise revenues from KShs 1.5 Trillion raised in 2017/2018 to KShs 1.95 Trillion in 2018/2019.
This represents a 31% growth in revenue compared to 6% growth in the last financial year and an average annual growth of 11% in the last five years. Raising revenue by 31% in a single year in a struggling economy is a tough call.
Failure to raise that revenue will likely see the government default on its debt obligations or see a tragic decline on government spending as it races to pay debt. Both situations will have serious consequences on the economy.
Imposing VAT on fuel would not be a big issue if the government had a plan of stabilising the debt situation. Sadly, the government is just firefighting and even making the situation worse by adding more debt. We are in a tight situation with no easy way out.
As can be seen from the chart below, the government seeks to raise revenues from KShs 1.5 Trillion raised in 2017/2018 to KShs 1.95 Trillion in 2018/2019.
This represents a 31% growth in revenue compared to 6% growth in the last financial year and an average annual growth of 11% in the last five years. Raising revenue by 31% in a single year in a struggling economy is a tough call.
Failure to raise that revenue will likely see the government default on its debt obligations or see a tragic decline on government spending as it races to pay debt. Both situations will have serious consequences on the economy.
Imposing VAT on fuel would not be a big issue if the government had a plan of stabilising the debt situation. Sadly, the government is just firefighting and even making the situation worse by adding more debt. We are in a tight situation with no easy way out.
No comments:
Post a Comment