The parliamentary budget office sees tough economic times ahead for Kenyans due to a rise in the cost of living in the second half of the year.
Although inflation has been at a relatively stable rate in the first nine months of the year, MPs foresee an increase in the cost of living on account of the harmonised electricity tariffs and the 16 per cent VAT on petroleum products.
”It should be noted that though the macroeconomic fundamentals are poised to remain stable within the year, there are some headwinds which may adversely affect growth,” the office said it its half-year economic and fiscal update.
Average inflation for the January-August period stood at 4.18 with the highest rate recorded in January at 4.83 and lowest inflation in April at 3.73.
Despite being well under the Central Bank target which ranges between 2.5 and 7.5, a rise in inflation will push up household expenditures.
The cost of rent, electricity, fuel, maize flour, milk, sugar among others are likely to rise as the year draws to a close.
The recently imposed VAT on petroleum products has already increased fuel prices and in turn, raised the cost of transport and production.
Cereal Millers Association chairman Mohamed Islam on Monday said maize and wheat flour processors will raise prices to allow members absorb additional costs.
“The recent introduction of VAT on petroleum products has exacerbated the situation as millers and all players along the supply chain are now factoring in these additional costs in their production,” he said.
Last month, the Energy Regulatory Commission introduced the harmonized tariff, scrapping the Sh150 monthly fixed charge for all domestic power users.
Although the new regime cut down costs for low-income households using 0-15 Kwh and the super rich whose monthly power bill exceeds 1,500 Kwh, the middle class using between 16-1500 Kwh has been forced to pay more for electricity.
On August 29, MPs voted to shelve the fuel tax until September 1, 2020, to cushion Kenya from the high cost of living. The tax has been in effect over the past six days.
Yesterday the High Court in Bungoma temporarily stopped its levying pending the hearing and determination of a suit filed by two people.