Cost of imports to rise on new EAC levy

Monday May 18 2015
kisumu pier

Workers load soap on to a ship for export at the Kisumu pier. The levy was the only highlighted option among various choices for funding the regional budget. PHOTO | FILE

The cost of imports looks set to rise with the planned introduction of a one-per cent levy on goods coming outside the East Africa Community to fund the regional bloc’s budget.

In the budget speech made to the East African Legislative Assembly last week, the levy was the only highlighted option among various choices for funding the regional budget. Currently, the budget is mainly funded by donors.

This is the second time that the levy is being floated after it was rejected last year on grounds that it would sharply increase the cost of goods and doing business.

“The ministers of finance received the proposals including a one per cent levy on imports from outside the EAC region,” said Harrison Mwakyembe, chairperson of the EAC Council of Ministers.

“They will consider the comments submitted by partner states, finalise the proposal and recommend a sustainable financing mechanism for the community council and summit for consideration and approval during the financial year under review.”

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Kenya imported goods worth Sh1.6 trillion last year, meaning the levy would net the regional bloc Sh16 billion. Other EAC member states are Tanzania, Uganda, Rwanda and Burundi.

The proposed levy is modelled on Kenya’s railway levy that charges 1.5 per cent on imported goods. Proceeds help to build the new Mombasa-Nairobi railway line. The EAC levy sets the stage for price increases, including fuel, food, cars and second-hand clothes, with the potential effect of eroding the purchasing power of most households.

It would also see a dramatic increase in the revenues of the regional body whose budget for the upcoming financial year is Sh10.5 billion.

In the budget, the five partner states will contribute Sh4.5 billion while donors will contribute Sh5.5 billion. The budget is slightly less than Sh11.9 billion for the current financial year due to donors scaling down their contribution and partner states unwilling to contribute more.

“It is worth to note that, while the development partners’ support to the budget is expected go down, the partner states’ contributions to the budget for the next financial year will remain the same as current year,” Mr Mwakyembe said.