NAIROBI (Reuters) – Kenya has proposed a bill to scrap all taxes on basic commodities including maize, wheat flour, milk, bread and medical supplies to rein in inflation that has fanned widespread discontent.
A statement from the presidency on Thursday said the cabinet had proposed the new bill, that will be debated and either approved or rejected by parliament soon, which also exempts goods and services for export from Value Added Tax.
“The cabinet reiterated the need to make basic essential commodities affordable by the majority of Kenyans hence the decision to zero rate the goods,” the statement said.
On January 12, the government said it would reinstate taxes on grains and fuel by the end of its 2011/12 July-June fiscal year as global crude prices eased.
In a letter to the International Monetary Fund, former finance minister Uhuru Kenyatta and central bank Governor Njuguna Ndung’u said Kenya would phase out the tax measures as a sign of its commitment to a free market regime with no controls on prices, interest rates and exchange rates.
Kenya had removed all taxes on kerosene and lifted the import duty on wheat and maize in April last year to cushion low-income families after rising consumer prices sparked widespread frustration in east Africa’s biggest economy last year.
With presidential and parliamentary elections looming within the next 12 months, the heat is turning up on policymakers to shield low-income consumers from runaway prices.
The proposed bill follows the enactment of a law on price controls on any essential commodity in September, after the practice was abandoned in the 1990s in favour of economic liberalisation.
Kenya already sets a cap on fuel prices.
Consumer prices in Kenya surged in 2011, driving inflation to a high of near 20 percent in November. Kenya’s inflation rate slowed for the third consecutive month, to 16.7 percent, in February, and policymakers are keen to see this trend continue to ease the frustration that has been mounting over high prices.
A near two-week strike by health workers that ended on Thursday had left ill patients without medical treatment, the latest in a string of protests in the past year as soaring consumer prices fanned widespread discontent.