Food imports hit record Sh200b on tax window

Wednesday, October 4th, 2023 09:00 | By
Colorful fruits and vegetables colorfully arranged at a local fruit and vegetable market in Nairobi, Kenya.
Colorful fruits and vegetables colorfully arranged at a local fruit and vegetable market in Nairobi, Kenya. PHOTO/iStock

Kenya’s food import bill increased by 50 per cent in the first seven months of 2023 as traders and manufacturers took advantage of a duty-free importation window issued in January to plug the food deficit.

The latest data from Kenya National Bureau of Statistics (KNBS) shows the value of food and beverage imports between January and July hit a six-year high of Sh199.8 billion in 2023.

This is Sh66.5 billion or 50 per cent more than an import value of Sh133.3 billion during the same period in 2022, a factor worsened by a cut in local production due to the prolonged drought the country witnessed last year and rolled over to early 2023.

Although the one-year duty-free import of various food items issued by the National Treasury was meant to cool down the high food prices, the weakening Kenyan shilling against the dollar has worsened the overall import bill.

In the first half of the year, Kenya witnessed a significant decline in forex reserves which triggered a hike in demand of the dollar – the major currency used in global trade – pushing the shilling to a current low of about Sh147 per greenback.

Harvesting season

Under duty-free import, the Treasury allowed entry of maize, rice, sugar, soya beans and meals, and edible oil, among others. The directive, which is still active, has now collided with the ongoing harvesting season, giving consumers hopes of further decline in the prices of food items in the coming months.

“Prices of key non-vegetable food items, particularly maize and wheat flour, declined following improved supply attributed to the ongoing harvests and government measures to zero-rate key food imports,” the Central Bank of Kenya (CBK) said yesterday after the Monetary Policy Committee (MPC) meeting.

Though falling within the CBK’s target range, Kenya’s overall inflation rose marginally to 6.8 per cent in September 2023 from the previous 6.7 per cent in August, with the biggest impact being felt on food inflation. Food prices, partly driven by costly fuel, have been a major driver of recent runaway inflation, rising by double-digits on a year-on-year basis between April 2022 and June 2023.

The Survey of the Agriculture Sector conducted in the first half of September 2023 by CBK showed that the prices of key food items, particularly maize, were expected to decline further with the ongoing harvests in the main maize-producing regions.

However, the government will now be looking at ways to avert possible post-harvest losses – the quantity and quality reduction of produce between harvest and consumption period – to ensure food security. 

Treasury Cabinet Secretary, Njuguna Ndung’u, said the government will utilise technology to process and store food to minimise post-harvest losses. President William Ruto’s administration has been trying to subsidize farm inputs like fertilizer and seeds to boost production.

“Now, we need to think about post-harvest solutions that are going to be crucial for us. We are all organising ourselves, even at the village level, talking about post-harvest solutions so that we remove constraints,” Ndung’u said last week during Kenya Economic Report (KER) 2023.

The increase in food import bills came on the back of bottlenecks in global supply chains, which forced countries with surplus to cut their export volumes in a protectionist move that further exposed Kenyans to hiked food prices.

Without a rise in food import bills, Kenya’s overall import value would have declined by a bigger margin, considering that expenditure on industrial supplies, machinery, and fuel declined in January-July 2023.  For instance, bills on industrial supplies dropped by 15.8 per cent to Sh212.4 billion in 2023 from Sh252.37 billion in a similar period last year.

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