Duty Waivers: Expenditure on food imports has surpassed that of machinery

This year, Kenyan expenditures on food imports have surpassed their spending on capital goods such as machinery for the first time. This highlights the impact of an extended drought and disruptions in global supply chains, leading the William Ruto administration to grant duty waivers on essential food items.

According to an analysis of the most recent official data, traders have invested a record-high of Sh199.75 billion in imported food and beverages during the first seven months of the year. This represents a significant increase of 49.84 percent compared to the Sh133.30 billion spent during the same period last year.

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These developments occurred concurrently with the Ruto administration, which assumed power in mid-September 2022, implementing import duty waivers to facilitate the acquisition of crucial food items from abroad.

Items permitted entry into the country without taxation comprised white maize, rice, yellow maize, soya beans, soya bean meal, various protein concentrates, and feed additives.

The exemption was authorized with the objective of “addressing the shortfall in food reserves and reducing and stabilizing food costs,” as stated by Treasury Cabinet Secretary Njuguna Ndung’u.

Provisional data, compiled by the Kenya National Bureau of Statistics, reveals that the spending on imported food surpassed the expenses related to machinery and other capital goods, including tools and equipment used in production processes. The value of these capital goods declined by 9.64 percent to Sh157.29 billion during the assessment period.

This increase in the food import bill predominantly stems from the enduring repercussions of a severe climate change-induced drought experienced last year, believed to be the most severe in 40 years. Additionally, the Russia-Ukraine conflict exacerbated disruptions in supply chains, causing prices of food commodities such as wheat and rice to soar.

Furthermore, this growth partly results from the depreciation of the Kenyan shilling over the course of the year until July, with an average exchange rate of 142.36 units against the US dollar compared to 118.80, representing a depreciation of 19.84 percent.

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