NAIROBI (XINHUA) – Kenya is working on new regulations that will result in policy intervention to reduce importation of non-essential products like consumables to reduce the strain on the shilling exchange rate, acting Minister for Finance Robinson Githae said on Tuesday.
Mr Githae said the interest of the government is to see gradual reduction in importation of food stuffs and lifestyle products that can be sourced from the local market. “The treasury is now consulting with the relevant government departments to find how we can effect this policy shift,” said Mr Githae who also doubles as the Minister for the Nairobi Metropolitan.
The basis on the planned policy intervention is to reduce the effect of external factors from affecting the stability of the shilling. Last year, Kenya shilling suffered 28 per cent exchange rate drop against the US dollar in a move that distorted pricing of imported goods and services before the Central Bank intervened to stabilise the local currency.
“We need to dampen the appetite for imports for products like eggs, sausages and others that can be sourced from the local market,” he said while addressing a workshop of central bank governors and financial experts meeting in Nairobi on Tuesday to deliberate on how to curb inflation in East Africa to single digit level.
East Africa Community member countries except Rwanda have seen inflation surge to two digit levels in the last one year because of high oil prices, high food prices and volatility in their exchange rates.
Despite Kenya being a predominant agriculture based economy, food outlets for instance have been importing products like raw potatoes from South Africa and Egypt and also eggs among other readily available agro produce because they say the local suppliers do not offer corresponding quality products.
It was not clear from the minister what measures for example the government will take to enforce local purchase of agriculture products, only saying that the measures to be taken will be communicated after deliberations within the government are finalised. One possible measure expected is to increase import duty on products identified as non-essential imports to make them more expensive than those produced locally.
But import duty intervention will have to be done carefully so that it does not attract similar actions on Kenyan goods exported to countries that may be affected. For example, effecting higher duty on Egyptian potato imports may trigger Egypt to retaliate by boycotting Kenyan tea.
The most recent data from the Central Bank of Kenya indicates that the value of imports increased by 22.7 percent to 14.4 billion U.S. dollars in the year to September 2011, mainly on account of increased payments for imports of oil, manufactured goods, machinery and transport equipment. Oil imports accounted for 25 per cent of this import bill.
The total value of exports on the other hand rose by 750 million dollars to 5.7 billion dollars in the year to September 2011 reflecting increases in exports proceeds from coffee, manufactured goods, raw materials and chemicals and related products. This means Kenya imported 2.5 times the value of the products it exported, putting a strain on its currency.
