Government on Collision Course with IMF as it Backpedals on Price Fixing
Kenya’s cabinet announced this week that it will set the price for maize purchase this year, potentially leading to conflict with the International Monetary Fund.
The announcement is a departure from an earlier directive that saw the State stop direct purchases of maize from farmers through the National Cereals and Produce Board (NCPB).
The World Bank has been against Kenya’s move on price fixing for key commodities, especially maize, to curb distortion of price in the market and this was one of the conditions given to the country by the IMF for a loan facility.
“Cabinet authorised the operationalisation of the newly promulgated Strategic Food Reserve Regulations, 2023. Under the framework, the government will purchase at least 1 million bags of maize to be maintained as part of our nation’s Strategic Food Reserve,” read the cabinet dispatch.
The NCPB regulations, prepared by the Ministry of Agriculture and Livestock Development and gazetted on March 13, 2023, eliminate the outright purchase of maize from farmers at administratively determined prices.
“Kenya’s government retains an outsized role in marketing agriculture outputs, especially maize, through the NCPB. This creates opportunities for rent-seeking and leaves little room for private sector participation in the marketing of maize,” said IMF.
According to the World Bank, NCPB used to buy maize at a premium above the price offered by the market and sell to milling companies at discounted prices.
“These direct market interventions created disincentives for the private sector to participate in maize storage, marketing, and value chain activities; they also disadvantaged the smallholders, who form the majority of Kenya’s farmers,” said the agency.
Maize prices have started falling in the wake of an increase in supply and farmers have already petitioned the government to intervene by setting the price that the produce will be bought at this year.
A 90-kilo bag of maize is now going for between Sh4,800 and Ksh5,000 from a high of Ksh5,800 previously.