Kenya’s July Inflation Rate Surge to 6.44% After New VAT

Kenya’s inflation accelerated to 6.44 per cent in July of 2021 from 6.32 per cent in June, its highest level since February 2020.

The increase is due to the effects of the Finance Bill 2021, which contained a raft of tax measures with a substantial impact on households and the economy.

The government starting July raised taxes on a number of products, including cooking gas and mobile money airtime.

However, it remained stable within the Central Bank of Kenya’s target band of 2.50% – 7.50%.

“This was mainly driven by a rise in prices of commodities under food and non-alcoholic beverages (8.84 per cent); housing, water, electricity, gas and other fuels (6.03 per cent); and transport (10.33 per cent) between July 2020 and July 2021,” the Kenya National Bureau of Statistics said.

During the month, the Housing, Water, Electricity, Gas and Other Fuels’ Index increased by 1.34 per cent due to an increase in prices of cooking gas, which went up by 15.43 per cent.

The cost of electricity went up by 0.76 per cent and 1.06 per cent for 200 Kilowatts and 50 Kilowatts, respectively.

The Information and Communication Index increased by 1.81 per cent, mainly as a result of an increase in the price of mobile phone airtime, which went up by 2.40 per cent between June 2021 and July 2021. 

”Inflation pressures are expected to be elevated in the near term mainly driven by increases in food and fuel prices, and the impact of the recently implemented tax measures,” Governor Patrick Njoroge said Thursday post-Monetary Policy Committee.