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Kenyans brace for tougher times as steep new fuel tax to take effect 

NAIROBI (Xinhua) -- Kenyans are preparing for tougher times starting next month when the government’s new tax measures on fuel take effect.

The government imposed a 16 percent value added tax on all fuels, a move that is expected to increase prices of diesel, super petrol and kerosene.

A liter of petrol, according to the Energy Regulatory Commission, would now cost at least 1.3 U.S. dollars in the capital Nairobi and 1.4 dollars in upcountry towns. A liter of petrol currently in Nairobi goes for 1.1 dollars.

The raise on fuel prices is expected to have a spiral effect on the cost of other basic commodities, pushing their prices up.

The tax measures are on the back of a push by the International Monetary Fund (IMF) to enable the governments raise more revenue to curb mounting debt following increased domestic and external borrowing.

The measure was among the conditions given to Kenya by IMF in 2015 when it offered the East African country 1.5 billion dollars standby loan.

The fuel price hike, therefore, sets up the East African nation’s residents to higher inflation.

Goods and services whose prices are set to rise include electricity, transport, all manufactured products like milk, bread and cooking fat, and all agricultural produce.

“This is not good news to us. We are already struggling to fend for ourselves as things stand now. Any price increase would therefore put us in a squeeze,” Moses Wachira, who runs a clothes stall in Nairobi, said Friday.

Wachira noted that business has been low for the past two months, a situation that has seen him make little profit and thus struggle to pay his rent.

“Most of us are struggling, life is tougher. If it is going to be tougher than this starting next month, I wonder what majority of citizens would do,” he said.

The worst to be hit by price increases will be the low and middle income earners, who make the bulk of the East African nation’s population.

The Kenya National Bureau of Statistics classifies low income earners as those who earn between 100 dollars to 236 dollars per month.

On the other hand, Kenyans earning between 236 dollars and 1,199 dollars a month belong to the middle income band. A majority of the low income earners engage in small businesses and live on less than a dollar a day.

Commuters will equally feel a greater pinch as fare prices will rise. Matatu Welfare Association, which represents public transport vehicles, said they would raise fares by between 0.10 dollars and 0.30 dollars.

Prices of most commodities currently are relatively low, with Kenyans buying most commodities affordably, a situation that has helped to keep inflation below 5 percent.

Henry Wandera, an economics lecturer in Nairobi, said inflation would certainly rise and would even double.

In the agriculture sector, he noted, fuel constitutes 30 percent of the costs. “An increase in fuel prices certainly leads to a rise in food prices and this in turn pushes up inflation,” he said.

He added most manufacturers use diesel and electricity in their operations and thus would pass the cost to consumers.

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