Rising food, commodity prices push December inflation to 8.01pc
The new excise duty raised the cost of a number of items including cars, beer, cigarettes, juices and water. PHOTO | FILE
What you need to know:
The cost of living measure has shot past Central Bank of Kenya’s preferred ceiling of 7.5 per cent.
Treasury enforced the Excise Duty Act in December 1, allowing KRA to charge more levies on bottled water, cigarettes, beer and juice.
Rising food, beer and cigarette prices helped push up inflation rate to a 16-month high, denying consumers the benefits of lower fuel and electricity costs.
The Kenya National Bureau of Statistics (KNBS) data shows that inflation rose from 7.32 per cent in November to 8.01 per cent in December — marking the highest level since August last year when it stood at 8.36 per cent.
The year-on-year inflation rate was above the Central Bank of Kenya’s preferred medium term range of 2.5-7.5 per cent and against the banking regulator’s forecast of lower inflation with the stop of heavy rains.
The rise in inflation makes it more likely that the central bank would raise interest rates in coming months.
Food and non-alcoholic beverages index rose by 13.26 per cent from the same month last year while alcoholic and tobacco index was up 15 per cent following the introduction of new taxes on beer and cigarettes.
Transport prices edged downwards by 0.69 per cent on lower petrol costs.
“As a result of increase in excise duty, prices of beer and cigarettes increased significantly,” the KNBS said in a statement yesterday. “There were notable falls in the cost of electricity, kerosene and cooking gas.
The new excise duty took effect on December 1, raising the cost of a number of items including cars, beer, cigarettes, juices and water. The new taxes are expected to help the government raise additional Sh25 billion from the items.
Beer is now attracting a flat rate tax of Sh100 per litre. Previously the alcoholic beverage was charged the higher amount of between Sh70 per litre and 50 per cent of the ex-factory price. A bottle of 500 ml of beer rose by Sh30 on average.
Tax on cigarettes more than doubled from about Sh1.20 per stick to Sh2.50.
Inflation has been increasing since September, when the cost of living measure stood at 5.97 per cent, after prices of some foodstuffs shot up.
Rains were particularly heavy in November, blamed on the El Niño weather phenomenon.
The heavy rains have washed away or made impassable roads, cutting off some farmers from markets. Some crops have also been damaged.
In early December, Central Bank governor Patrick Njoroge said inflation rate is likely to start falling when heavy rains stop. “We don’t like the headline (inflation) number because we are being driven by El -niño and other things,” said Dr Njoroge.
“We expect it to come down. There is no doubt about it in my mind.”
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