We have options on reducing the cost of living

**Wilson Jeremba sorts out cabbages at Kibuye market in Kisumu County**. [Collins Oduor, Standard]

The Azimio la Umoja and Kenya Kwanza talks are skirting the cost of living in their deliberations. It’s a hot potato.

Why is it a hot potato, what options do we have?

First it was a campaign promise. The political contestants knew the high cost of living was hurting Kenyans and they made promises. We listened.

We did not ask how they would reduce the cost of living. We were too excited. More like a man about to marry, caring less about the source of dowry.

One year into power, the cost of living has continued to go up. And with conflicts between Hamas and Israel, it could keep rising as oil is used as a bargaining chip, supply chains are disrupted and more investors seek a safe haven in the dollar, which will appreciate leading to a weak shilling.

This will make imports more costly including oil and compound the effects of war in Ukraine.

The other driver of the high cost of living is more taxes, which businesses load into our prices. The weather has been good, muting the effect of food shortage. Did I see a packet of maize flour going for Sh135 in one of the supermarkets. Why is that not headlines?

The other cause of high prices is emotional. Lots of entrepreneurs, businessmen and investors have not settled emotionally one year into the new government. The economic fog has not cleared.

Why else do they want higher rates on the bonds or Treasury bills? Why else are short-term government paper, Treasury bills pricier? Why are they fearing investing in the long-term bonds? Why are bonds being undersubscribed?

Entrepreneurs or businessmen are jittery, fearing new taxes, KRA visits and economic uncertainty compounded by global issues. When I talk to businessmen, both big and small, they seem to feel besieged.

Fear seems to engulf them. Fearnomics is a reality. While enforcing tax collection is the work of the government, fear is not the best option. You can get more milk by playing music to a cow than threatening it. How did Kibaki raise tax revenues substantially?

Enough lamentation. What options do we have to reduce the cost of living?

Stripped to the bone

We have options as individuals and government. We can reduce our costs, but for lots of Kenyans they have been stripped to the bone.

If you decided to walk to work instead of taking a matatu, how else can you reduce the cost of transport? If you take ugali with sukuma wiki, what else can you take ugali with? Cost reduction has a limit.

We can focus on the revenue side, getting more money. Options include starting side hustles. Will higher prices force us to become innovative and creative, unleashing our entrepreneurial potential? Eating into savings and borrowing are the other individual options. Data supports that.

My bigger worry is; will the high cost of living fan the embers of corruption?

Employers fear increasing the wages or salaries to cushion employees against the rising cost of living could threaten their existence. The government also fears such a raise would increase inflation and make the situation worse.

With debt to pay, and other obligations, a wage or salary raise is not one of the easy options.

What can the government do? We have a precedence. Covid -19. How did we shield the economy from the pandemic? The government came up with some bold measures that put money in our pockets.

CBK reduced the cash ratio for banks and made more money available to us. This should reduce interest rates, making borrowing easier and stimulating the economy, and creating jobs. We seem to fear inflation too much.

Some hardnosed economists could argue that higher and newer taxes will reduce the cost of living. We have less to spend, and higher prices reduce the demand for goods and services and by extension lower prices.

The hard truth is that we should reduce VAT from 16 to say 12 per cent. That will hopefully put more money into our pockets. We did that during Covid-19. We should treat the high cost of living with the same urgency as Covid-19.

A lower VAT rate could earn the government more revenue. Remember Laffer’s curve. We can reduce corporate tax rate, increase reliefs and make money available for vulnerable people such as the orphans and elderly. These options were tested during covid -19.

What of working from home just like during Covid-19? This will reduce the cost of transport and other services. This is a low lying fruit. All employers including the government should take up this offer now.

Money circulation

Pending bills should be paid. They are holding our economy hostage by reducing the speed of money circulation. Why do we fail to pay for work done or services rendered?

These are short-term measures. In the long run, we have to expand our economy through new markets, supporting innovations, entrepreneurs and injecting the country with more optimism.

We may have no control over wars far away, but we can reduce the cost of living in our own small ways. One of my fears is having angry citizens grumbling silently, working less and not unleashing their full economic potential. We shall all be losers.

If we could triumph over Covid -19, we can triumph over the high cost of living. What do you think?