Cheap food slows inflation, eases fuel, airtime tax burden

Wednesday October 31 2018

A litre of petrol retailed at Sh116.48 last

A litre of petrol retailed at Sh116.48 last month, down from Sh117.54 in September and higher than Sh101 in October last year. FILE PHOTO | NMG 

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Drop in food prices marginally cut Kenya's inflation to 5.53 percent in October, easing pressure on households after high fuel taxes pushed the cost of living measure to a 12-month high in September.

The Kenya National Bureau of Statistics (KNBS) data shows that prices of nearly all basic food items including the staple maize flour, sugar and vegetables fell in October, reducing the impact of increased fuel and airtime expenses.

Inflation rose to its highest rate in nearly a year in September to 5.7 percent, the statistics office said on Friday, reflecting the impact of a new value added tax on fuel of eight percent.

“Between September and October, food and non-alcoholic drinks index declined by 1.76 percent...even though year-on-year food inflation was 0.52 percent in October,” said KNBS director-general Zachary Mwangi.

“The decrease was mainly due to lower prices of maize and maize products compared to the previous month.”

Inflation has remained within the government’s preferred band of 2.5-7.5 percent despite the pressure from the new tax.

The new taxes on fuel and airtime have, however, continued to hit households in the second month of implementation.

The KNBS data shows mobile phone airtime prices climbed 8.83 percent in October to Sh4.03 per minute up from Sh3.70 last month—the first rise in many years in a market where the telecom firms have been lowering tariffs to grow market share.

A litre of petrol retailed at Sh116.48 last month, down from Sh117.54 in September and higher than Sh101 in October last year.

This raised fares for a 250-kilometre journey in October to Sh426.67, up from Sh400 a year ago. But the effect of the increase was eased by the falling food prices.

The price of maize grain dropped 14 percent in October to Sh34.53 per kilogramme, down from Sh40.55 last month, and Sh56.80 last October. This has been linked to the ongoing harvests.

Similarly, the price of maize flour dropped 14.36 percent in October to a national average of Sh83.83 per two-kilo packet compared to Sh97.88 last month or Sh101.58 in the same period last year.

Also helping to pull down inflation in October were sugar, carrots, cabbages, tomatoes and kales which have recorded price drops of between 2.78 per cent and 7.24 per cent from September.