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Expensive airtime and cooking gas push up the cost of living in July

BUSINESS
By Dominic Omondi | August 1st 2021

The new tax measures introduced by the National Treasury marginally pushed up the cost of living in July, the latest data from the Kenya National Bureau of Statistics (KNBS) shows.

Overall, prices of goods and services in the economy increased at a rate of 6.44 per cent last month compared to an inflation rate of 6.32 per cent in June, with airtime and cooking gas joining cooking oil and paraffin in hitting the pockets of Kenyans.

Mobile phone airtime and liquefied petroleum gas (LPG) were among the items whose prices rose the fastest in July following a raft of tax measures contained in the Finance Act 2021.

“The Information and Communication Index increased by 1.81 percent, mainly as a result of an increase in price of mobile phone airtime, which went up by 2.40 per cent between June 2021 and July 2021,” said KNBS in its monthly report on consumer prices index and inflation rates.

The price of mobile phone airtime increased from an average of Sh2.35 per minute in June to Sh2.41 per minute in July with providers applying the increased excise duty of 20 per cent following changes in the Finance Act 2021 that increased the so-called sin tax on telephone and internet services from 15 per cent.

A 13-kilogramme LPG retailed at an average of Sh2,394.18 in major urban areas, a 15 per cent increase from Sh2,074.23 in the previous month. This was the highest increase among the consumer items that KNBS highlighted.

This is after the 16 per cent value-added tax (VAT) which had been delayed was finally implemented on the petroleum product.

"In addition, electricity prices went up by 0.76 per cent and 1.06 per cent for 200 Kilowatts and 50 Kilowatts, respectively,” said the national statistician.

On Thursday, Central Bank of Kenya Governor Patrick Njoroge noted that they had since factored into the cost-of-living index, or consumer prices index (CPI), the new tax measures, and reached the conclusion that they would increase inflation rate by 1.78 percentage points.

In the rebased CPI, mobile phone airtime is the item with the single largest weight, which means that even a marginal increase will have pronounced effects on the pockets of Kenyans to whom for every Sh100 they spend, at least Sh5.5 has to go into their phone.

Prices of food also weighed heavily on the Kenyans with a litre of cooking oil salad increasing by 3.64 per cent to retail at Sh265.15. In the same month a year ago, the same item went for Sh199.89 which translates to a year-on-year increase of 32.6 per cent.

A kilogramm e of cabbages retailed at Sh45.88 compared to Sh44.79 in the previous month.

However, there was a reprieve for a lot of poor families after prices of several food items declined in the period under review.

Some of the items whose prices dropped in July compared to June are tomatoes, white bread, sugar and maize.

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