Skepticism and hope in Uhuru last Budget

Thursday, April 7th, 2022 06:10 | By
Image used for representation purposes only. PHOTO/Courtesy

Hard hit by a steady rise in the cost of living, Kenyans are crossing their fingers that today’s Budget speech will ease the financial burden they have been carrying in the past year. From captains of industry to mama mboga, the plea is the same: Treasury Cabinet Secretary (CS) Ukur Yatani should make life bearable.

Yatani will be walking a tight rope to ensure that President Uhuru Kenyatta’s last Budget addresses his legacy projects amid global crises beyond his control but has to strike a balance between tax collection and addressing the spiraling cost of living.

A spot-check by People Daily revealed that most Kenyans are concerned about the increasing cost of basic commodities such as food, fuel, cooking gas and kerosene. In the past two months, gas prices have more than doubled, making the commodity unaffordable to majority of low-income earners.

Reducing taxes

Latest data from the Kenya National Bureau of Statistics shows that prices of cooking oil, wheat flour and gas rose 6.50 per cent, 4.47 per cent and 7.76 per cent, respectively, in March. Meanwhile, gasoline and diesel prices rose 3.83 per cent and 4.49 per cent.

The Kenya Association of Manufacturers (KAM) is hoping the Budget “will centre mwananchi’s needs by reducing taxes for the basic commodities. Additionally, it should focus on reducing the cost of production for manufacturers, which will ultimately reduce the cost of goods for citizens”, says the CEO, Phyllis Wakiaga.

She hopes the Budget would incentivise investors to venture into manufacturing while promoting the growth of SMEs and large manufacturers. Among other proposals the KAM wants include: Lowering the cost of industrial inputs, manufacturers to be allowed to offset “inputs” and that the minister should allow excess interest to be carried forward for up to five years.

Naivas Supermarkets chief operating officer Willy Kimani is also rooting for prices of commodities to come down so that consumers are shielded.

“Customers are under a lot of pressure. Any form of cushioning is welcome, especially subsidies in cooking oil, flour and other basic commodities that Kenyans use everyday. We want the government to offer support to importers and ease the process of taxation at the ports. Also, suppliers are increasingly piling pressure on us to deliver so if the government can effect the tax refunds, that will go a long way in helping Kenyans,” he says.

The Jua Kali sector has also been waiting for the Budget with bated breath. The Jua Kali association’s CEO Richard Muteti feels that cheaper credit and construction of industrial centres in counties will help revive the sector.

He says: “The sector has not fully recovered; we need more cushioning measures. What we need now is affordable credit. The government had also promised industrial centres in all counties. We are looking forward to these so that the sector can be supported skills-wise. In the steel sector, we expect a change because as schools reopen with the current high prices of steel and metal raw materials, school boxes will expensive.”

Skepticism is, however, threatening to cloud the hope that Kenyans have as they wait for the Budget speech.

Phoebe Akinyi, a shoe shiner on Nairobi’s Koinange Street, expresses fears that the recent rise in the price of basic commodities will unlikely be solved by today’s interventions.

“It would seem that the government doesn’t care much about what’s going on with commodity prices. Fuel drives everything. Supply of most goods is done using diesel, this means everything has to go up once fuel cost goes up,” says Akinyi.

She adds: “We are not sure if the prices will ever come down, which means an uncertain future for poor Kenyans.”

Louis Ochieng’, who comes from Ndhiwa sub-county in Homa Bay County, notes that prices of essential commodities had tripled in the past 12 months, straining household budgets. “We are requesting the government to consider reducing the taxes,” he says.

He adds: “It is unfortunate that the prices of important items such as soap, cooking gas and cooking oil have increased threefold leaving us helpless. We urge the government to reduce the taxes in today’s Budget.”

Lynet Ombok, who also deals in second-hand clothes, expresses the same sentiments and is hopeful that the government will effect measures to cushion Kenyans from harsh economic realities.

Rising cost

“There has been an overall increase in the cost of doing business. All I am looking forward to is a reduction in the prices of unga, cooking oil and fuel,” she says.

A boda boda rider who works for one of the local taxi hailing apps Bolt, and who sought anonymity, reveals that they have had to change tack to keep up with the current fuel shortage and the increase in the price of the commodity.  He discloses that they have had to make an out of pocket agreement with customers who request their services to add some cash above the one displayed in the app.

“I have to do it because those in office don’t seem to consider that there has been an increase in fuel price, if we don’t do it will be unsustainable,” he says.

Despite the government maintaining that the rising cost of living is not exclusive to Kenya, a recent report by Stanbic Bank revealed that Kenyans felt the effects more due to increased taxes.

“It is a global phenomenon fuelled by numerous external factors, among them the ongoing Russia invasion of Ukraine, which has led to a rise in the global price of petroleum, which is a key factor in production,” a statement from the government said.

With the current financial year’s Budget set at Sh3.31 trillion against KRA’s collection target of around Sh1.8 trillion, it is unlikely that the government will lower taxes.

Samuel Nyandemo, an Economics lecturer at the University of Nairobi, says Kenyans should brace themselves for even tougher times ahead due to loan obligations that the country is grappling with.

Nyandemo says Kenyans should not expect a reduction in the prices of essential commodities, but rather foresees an increase in taxes for luxurious commodities such as alcohol and cigarettes.

“We are going to experience increased prices for basic commodities such as bread, unga and cooking oil, not because of taxes but due to shortages because of drought,” he says.

He points out that going forward Treasury will be incapacitated due to a constrained fiscal space as the government will be looking to complete its signature projects that are currently underway.

With the ongoing conflict between Russia and Ukraine and a constrained fiscal space for Treasury, Kenyans seem to have been trapped between a rock and a hard place.

The surge in prices comes at a time when average private-sector pay is growing at the slowest pace in a decade.

To complicate matters for Kenyans, any hopes of a quick economic recovery from the Covid-19 pandemic may not be forthcoming because of negative sentiment normally associated with a general election in the country, which threatens to be extremely competitive and highly polarising.

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