The Kenyan government presented its budget proposals for the 2008-2009 financial year on Thursday and announced measures to cushion their populations against soaring food prices.
Among the raft of measures announced on Thursday by Finance Minister Amos Kimunya included cuts in VAT rates and investments to boost agricultural production.
Other budget proposals included the scaling up of agricultural extension facilities for farmers, at a cost of 744 million shillings (about 11.6 million U.S. dollars) along with the expansion of the wholesale fresh product infrastructure to promote business and increase agricultural productivity.
However, despite Kimunya's announcements, analysts said Kenyans will have to wait longer to enjoy the benefits of his tax reduction which took effect on midnight Thursday.
Already supermarkets and other food outlets are yet to reduce the prices of bread, rice, maize meal and other consumer goods whose taxes were either reduced or abolished in the Budget. But beer prices went up just hours after the minister read his Budget speech.
"If the prices of basic commodities such as sugar and flour are high, then the farmers also increase the prices of their fresh produce so that they can meet these costs," said Roseline Muthoni,a trader at the Kawangware market in Nairobi said.
Managers at major retail outlets said they were still analyzing the new tax measures and were yet to adjust the prices of various commodities.
While presenting his budget, Kimunya said he would also be proposing to remove tax on bread and rice while reducing the import duty on wheat to 10 percent from 35 percent.
The Kenyan government, he said, would also allow for the tax free importation of maize so as to boost the country's strategic grain reserve to 8 million bags.
The country's post election violence that especially affected the fertile Rift Valley region early in the year led to a reduced maize harvest. Additional funding had also been allocated for the resettlement of internally displaced persons.
The minister said discussions are under way with Uganda and Tanzania on setting up a regional fertilizer factory to offset high costs and ensure long-term sustainable supplies, he said. The cost of fertilizer has almost tripled in Kenya since the beginning of 2008.
Kenya's inflation has spiraled the fastest, deepening to 31.5 percent in May compared with Uganda's 11.2 percent and Tanzania's 9.1 percent, mainly on rising food prices.
Thiagarajan Ramamurthy, the operations manager of Nakumatt Supermarket, said the chain was still studying the highlights of the budget and would respond by the end of the day.
However, he said the changes may not be effected overnight because some of the products in stock had been bought before the budget was read.
The east African nation has been hit by the inflation striking across the world, but a post-election crisis disrupted planting and forced farmers out of their homes in bouts of ethnic violence in January and February.
Like most on the continent, the three nations derive most of their income from agriculture but despite higher market prices, farmers will still struggle because of the cost of fertilizer, seeds and pesticides.
The Cereal Millers Association said it expected the price of a 2 kilogram packet of wheat flour to reduce by between 8 shillings (13 U.S. cents) and 10 shillings (16 U.S. cents), subsequently reducing the price of bread and biscuits.
Wheat flour in major retail outlets was on Friday selling at between 110 shillings (1.72 dollars) and 116 shillings (1.81 dollars) as the reduction had not been effected. A 2-kg packet of maize flour was selling at between 64 shillings (1 dollar) and 85 shillings (1.33 dollars).
The millers' association welcomed the move reducing duty on imported wheat grain at a time when world wheat prices are at a record high and basic food costs have escalated beyond the common man's reach.
The government said it would make further provisions give farmers access to affordable credits.
Kimunya said at least 25,000 farmers have benefited from 3 billion shillings (46.9 million dollars) provided under an existing seasonal credit loans scheme.
However, the Kenyan government wants no re-introduction of price controls. While Muthoni, the trader in Nairobi, welcomed the new measures outlined in the budget, especially the tax cuts. He said he personally would have liked to have seen price controls introduced.
"Local retailers might not even adjust their prices downwards, or they reduce them by 50 cents, which does not really make a difference," he told Xinhua.
Source: Xinhua
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