The proposed finance bill tax increases could further weaken the Kenyan shilling and reduce market liquidity which could slow down the private sector’s growth.
Families currently struggling with low income which translates to a lower purchasing power, which is crucial to the cost of doing business in the country together with an increase in petroleum costs.
Presently, the industry is experiencing weighty losses in the manufacturing sector. The situation is expected to worsen should the proposed Finance Bill pass and taxes be implemented. In order to pay suppliers, importers and dealers have had to spend more which will result in passing costs to the customers.
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According to the Central Bank of Kenya CEO survey conducted in May 2023, the high inflation and deteriorating shilling and the cost of conducting a business were pointed out by respondents as domestic issues that have the potential of limiting development in the short term.
As of May 2023, the inflation rate was at eight per cent, a rise from 7.9 per cent in April. The rise is a result of the rising food and energy costs. Petroleum prices rose further last month after the removal of fuel subsidies.
The Kenyan shilling has remained weak against the US dollar. In January of 2023, Ksh 123.42 was equivalent to one US dollar which is the main currency trade. The Shilling has lost about 12 per cent of its value currently retailing at Ksh 138.75 against the dollar.
According to the CBK, businesses intend to reduce the narrowing forces by expanding their markets, digitizing their processes and increasing sales and marketing.
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Manufacturers have however warned that the industry will be greatly affected specifically because of the stream of less expensive imports from neighbouring countries if any ideas in the Finance Bill get implemented.
