By Elvira Jordan
A Professor of Monetary Economics at the University of Port Harcourt, Prof. Peter Medee, has warned that the International Monetary Fund’s (IMF) recommendation for increased excise duties on sugar-sweetened beverages could generate more revenue for the government but may also worsen inflation and weaken consumers’ purchasing power.
Prof. Medee, a former Adviser to the Rivers State Governor on Economic Matters and Social Development, former Commissioner for Budget and Economic Planning, and former Commissioner for Energy in Rivers State, made the observation in an interview with Exceed FM News.
According to the economist, the IMF’s global “harm-based taxation” strategy, which seeks to discourage the consumption of sugary drinks linked to obesity, diabetes and cardiovascular diseases, carries significant economic implications beyond public health objectives.
He explained that while the policy is intended to improve public health and strengthen government revenue, it also places an additional financial burden on consumers by reducing their disposable income.
“The excise duty on sugar-sweetened beverages is a fiscal policy tool that not only increases government revenue but also seeks to reduce the consumption of products associated with obesity, diabetes and other cardiovascular diseases,” he said.
“However, taxation affects the purchasing power of consumers because anything that is taxed erodes disposable income. While it may boost government earnings, it also raises the cost of products, which could contribute to inflation.”
Prof. Medee further noted that although the policy targets products considered harmful to health, the resulting increase in prices could have wider economic consequences, including reduced consumer spending and lower investment in the affected industries.
He warned that the policy could trigger a form of imported inflation, given that it originates from an international framework rather than domestic economic considerations.
“Although the IMF policy is aimed at addressing the consumption of harmful products, it also reduces purchasing power and increases the prices of these commodities,” he stated.
“This could lead to imported inflation because the policy is not locally conceived but will ultimately impact local markets and commodities, transmitting higher inflation into those economies.”
The professor added that higher excise taxes would likely discourage both the production and importation of sugar-sweetened beverages, potentially reducing investment in the sector while simultaneously driving up product prices.
“It will control the production and importation of those harmful beverages and discourage investment and consumption. But because it is an increase in tax, it will inevitably increase the prices of those commodities and contribute to inflation,” he said.
The IMF has consistently advocated for excise duties on sugar-sweetened beverages as part of its global harm-based taxation framework. The international financial institution argues that such taxes serve a dual purpose: generating additional public revenue and helping to curb the rising prevalence of obesity, diabetes and cardiovascular diseases, particularly in developing countries.
However, Prof. Medee maintains that policymakers must carefully weigh the public health benefits against the potential economic costs, especially in economies already grappling with inflationary pressures and declining consumer purchasing power.
