Kenya inflation highest in 11 months due to new fuel tax

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Reflecting the impact of a new value added tax on fuel, the statistics office said Kenyan inflation rose to its highest rate in nearly a year in September 2018. Struggling to boost expenditure while cutting the country’s budget deficit, President Uhuru Kenyatta’s government introduced a 16 percent tax on petroleum products but later cut it to 8 percent.

The Kenyan National Bureau of Statistics said the inflation rate rose 5.70 percent year on year from 4.04 percent In August 2018, while on a monthly basis inflation was 1.02 percent from 0.31 percent in August.

Razia Khan, Head of Research for Africa at Standard Chartered in London said “the imposition of VAT on fuel was always anticipated to be a driver of September consumer price inflation”.The Transport Index rose 7.99 percent from August 2018 and was up 17.29 percent when compared with September 2017 due to increased petrol and diesel prices.

Despite pressure to abolish the new fuel tax, the central bank governor, Patrick Njoroge said he expected inflation to remain within the government’s preferred range of 2.5 to 7.5 percent. Khan however noted that upward pressure on inflation could rise. She said “expect to see more pressure from the rise in the global oil price, although continued shilling stability is an offsetting factor”.

 

 

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