Central Bank of Kenya (CBK) Governor Kamau Thugge now says there will be little to no inflationary pressure on Kenyans due to the new taxes passed in the Finance Bill 2023.
Thuge said the finance bill will have minimal impact on Kenyans due to the countermeasure in place including the reduction of the railway levy and import declaration levy.
While addressing journalists during the bi-monthly monetary policy meeting on Tuesday, June 27, the CBK Governor noted that the reduction of the two taxes will offset the new taxes passed on housing which is 1.5 per cent of gross pay, VAT on fuel which has increased to 16 per cent and an increase in NHIF contributions to 2.75 per cent.
“We have looked at all the factors and on the issue of VAT on fuel and other taxes, the Treasury has offset these by incentives such as the reduction in railway levy and import declaration,” Dr. Thugge said.
Moreover, Thugge defended the Central Bank rate hike by 100 basis points saying that there was new information that came to light over the one month that suggested inflation was going to increase.
“It looked like inflation was not going to go up in the last monetary policy meeting but in the last month, this has changed hence the move by the policy committee to adjust this,” he noted.
Nonetheless, the CBK boss said he will consult the Treasury to produce a roadmap for the issuance of a dollar-denominated bond that will allow the government to reduce the pressure on the shilling.