Fuel Prices in Kenya Hit Historic Highs as Inflation Looms.

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Fuel prices in Kenya have hit an historic high. A sharp rise in fuel prices amidst the pandemic sparked protests from legislators and motorists across the country. Fueled by the pandemic, the price of petrol in East Africa has seen a steady rise since last year. Moreover, the effects of compounding inflation are slowly trickling into Kenyan households as the taxman proposes higher excise duty.

Record pump prices

According to an Energy and Petroleum Regulatory Authority (EPRA) review, the price of petrol will retail at Ksh.135 per liter, the highest in Kenya’s history. However, due to public pressure, the government once again intervened by retaining subsidies on petroleum products. The government will now cushion Kenyans by paying petroleum importers Ksh. 7 per liter of petrol.

In the past few months, higher import duty costs and a weakening shilling have initiated a sharp rise in pump prices and the cost of consumer products. Back in July, fuel prices also shot up but the Kenyan government intervened by introducing subsidies on petroleum imports. It also introduced a zero-rate on food inputs to bolster the agricultural sector.

In Tanzania, the government also moved in to stabilize an increase in fuel prices. This month, fuel prices in Tanzania registered the highest increase since July. However, higher pump prices in Tanzania were partly fueled by increased demand from a recovering economy. However, with inflation slowly seeping into the East African economies, it is apparent that fuel prices will continue to rise.

Balancing the Books

Despite the economic dip, Kenya Revenue Authority (KRA) beat its tax collection target. KRA managed to collect Ksh.125 billion in taxes in August. Tax collection rose by a third after the taxman imposed higher levies on select consumer products. Kenya aims to increase excise duty in line with the current inflation rate of 6.5 percent.

According to a report by PricewaterhouseCoopers (PwC), banks contributed to a third of the collections by KRA. This was bolstered by an upsurge in digital lending. However, the report showed that the collections from banks was an overall drop of 12 percent from last year. In addition, Pay as You Earn (PAYE) contributions from permanent employees fell by 12 percent. Corporate tax also dropped five notches to 25 percent, an indication of dwindling profits from the private sector.

In a bid to raise revenue, the taxman has proposed higher excise duty on thirty-four consumer products. Consequently, the prices of household goods will rise by an average of 5 percent. According to the taxman, higher sin tax will also be imposed on alcoholic beverages, bottled water and fruit juices. In addition, there are different rates for every product; fruit juices- Ksh.11.04 per liter, bottled water- Ksh.5.47 per liter, wines- Ksh.165.93 per liter, sugar confectionery- Ksh.21.03 per kg.

In spite of the higher taxes, the alcohol and entertainment industry are barely staggering through the pandemic-stricken economy. The onset of the Covid 19 pandemic in 2020 hit East African Breweries Ltd (EABL) hard, slashing the company’s profits by 39 percent.

About Dickson Soire

Dickson Soire is a journalist from Kenya. He endeavors to use his skills in journalism, teaching and animation to educate, inspire and entertain young audiences. He aims to create relevant, timely and informative videos and articles that make technical information accessible to the public.