The International Monetary Fund (IMF) has weighed in on Kenya’s recent decision to cut Value Added Tax (VAT) from 13% to 8%.

Speaking at the IMF Spring Meetings in Washington, D.C., IMF Deputy Director of the Fiscal Affairs Department Era Dabla-Norris indicated that countries worldwide are adopting varied fiscal strategies, including tax cuts and spending adjustments, to cushion their economies.

According to Dabla-Norris, the IMF is closely monitoring how governments are reacting to the current economic climate.

“We are tracking what countries are doing around the world, and we’re doing this in a very comprehensive way. We’re looking at the types of measures that countries have put in place. And what we see is that countries are really adopting a wide range of measures.

“Some are adopting revenue-based measures, so cuts in VAT or excises. Others are doing spending-based measures, yet others are doing pricing measures,” she said.

The IMF cautioned that it is still too early to fully assess the financial implications of these measures, noting that governments appear to be acting cautiously compared to previous global economic 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, say, the 2022 shock, the energy price shock,” she added.

Dabla-Norris further pointed to uncertainty in the global economic outlook as a key factor behind the cautious approach, with many countries avoiding large-scale intervention packages for now.

“And part of it is because it’s not entirely clear. There’s a lot of uncertainty as to how long the situation will last, so countries are not necessarily coming out in full force with huge packages,” she further said.