For Sport wrote:Kirika wrote:
I tend to think Fuel has the biggest multiplier effect on prices in general. The GoK currently levies Ksh 29/ Ltr as tax, if you add the Inefficiency costs by KPRL the costs passed to consumers starts to look ponographic.
If the GoK was really serious in taming the inflation, they would simply snip off the levy and ensure there is a trickle down effect.
But im sure the revenue hawks are already addicted to this steady revenue stream.
Are you sure?
Yes the tax is 29bob on petrol, (I'm not sure about other petroleums)... PUNITIVE!
I agree with Kirika about the multiplier effect especially for diesel... eg. KENGEN are still using DIESEL TO GENERATE ELECTRICITY after many decades in operation...
We cannot expect our shilling to do very well with the current upward pressure on fuel prices & other imports (
a friend of mine is hoarding Toyota parts in his shop and waiting for the earthquake effects to reduce supplies... and I've been buying & holding EACables shares
)
If I were a GoK advisor I would tell them to take the following 3 simple actions:
1.Watch the numbers & if necessary, raise CBR by 25-50bps in April.
2.Cut fuel tax by half. This should reduce pump prices by 10-14bob a litre
3.Do the math... issue increased tranches of domestic debt to cover the deficit as it rises.
The logic of this is that:
1.Excess liquidity is mopped up by the securities.
2.Fuel prices cut will somewhat mitigate inflation of KES.
3.Tax-Paying-Wananchi will pick up the bill of the extra debt anyway so no harm done...
4.The Tbills & bonds can be thrown back to us to invest the funds we save on fuel...
I'm not an economist & hence a bit short sighted when it comes to graphs
I know its drastic (especially the tax cut part) but does it not make sense?
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