Posted on March, 14, 2023 at 08:54 am
The government has intervened directly in the market to stabilise prices of basic commodities to arrest inflation that is headed towards double-digit rates.
This comes at a time the Kenyan economy is battling multiple shocks from the currency crisis, an unrelenting drought and the Russia-Ukraine war.
Letter of credit
The State-owned Kenya National Trading Corporation (KNTC), which is tasked with the importation of essential commodities, says it has secured a Sh24 billion letter of credit from KCB Group to support the process.
KNTC is importing 125,000 tonnes of cooking oil, 25,000 tonnes of rice, 80,000 tonnes of beans, 200,000 tonnes of sugar and 150,000 tonnes of rice on a duty-free basis.
It has mapped 120,000 retail shops to sell these stocks to ease inflation that rose to 9.2 percent in February.
The plan is to force local manufacturers to lower their prices as the State becomes a de facto controller of the cost of essential commodities.
Market distortion
But there are questions on how the government can participate in the market this deeply and not cause a distortion or trigger arbitrage which will destabilise market forces of demand and supply.
The government is also not as efficient as the private sector in doing business.
It should therefore tread with caution so that this new importation craze does not end up hurting local manufacturers, and worsening the unemployment crisis by exporting jobs while at the same time losing out on taxes.
Source: Business Daily