Lower tax, reserves can reduce the cost of living
Many Kenyan households are going through rough economic times, squeezed by the rising cost of living. From the high cost of food to expensive fuel, the challenges Kenyans face are huge. And the indication is that the worst is yet to come, going by the vulnerability of our import-dependent economy to the ongoing chaos in the global commodity markets. Urgent interventions are required to assist thousands of households on the edge, going by the rising public uproar over the runaway cost of living.
Regrettably, the situation in the country is a reflection of years of poor planning and inaction by successive regimes.
We have previously faced the aftershocks of cycles of imported inflation but there seems to be no permanent solution to them or early preparation or to deal with such eventualities. For example, why is the state hesitant to adopt efficient strategies, such as building strategic reserves of food and fuel, for a bad day? Our reactionary quick fixes, such as fuel subsidy and relief food programmes, have become too predictable and with bad results. We recall how, in a desperate move to prevent public unrest the government has, since last year, spent billions of shillings in fuel subsidy and relief food, notwithstanding the painful economic lessons from many other developing nations that walked down a similar path.
As predicted by critics, the fuel subsidy scheme has, for the second time in six months, been ended, sending petroleum prices back to the historic highs recorded in September last year and kicking up a fresh storm by angry citizens.
As has been the case in many countries, most of these subsidy schemes were prompted, in part, by an incorrect assumption about how large the price increase would be and how long it would last. So, while the fiscal effects of the subsidy policies have varied, for some, as Kenya may have realised, they can be unexpectedly large and protracted.
Let the state urgently review taxes on key household items to make them affordable and create reserves of imports such as food, fuel and fertiliser to stabilise prices and supply.
