Nairobi - The cost of imports looks set to rise with the planned introduction of a 1 per cent levy on goods coming outside the East Africa Community (EAC) to fund the regional bloc’s budget.

In the budget speech made to the East African Legislative Assembly last week, the levy was the only highlighted option among various choices for funding the regional budget. 

Currently, the budget is mainly funded by donors.

This is the second time that the levy is being floated after it was rejected last year on grounds that it would sharply increase the cost of goods and doing business.

"The ministers of finance received the proposals, including a 1 per cent levy on imports from outside the EAC region,” said Harrison Mwakyembe, the chairperson of the EAC Council of Ministers.

"They will consider the comments submitted by partner states, finalise the proposal and recommend a sustainable financing mechanism for the community council and summit for consideration and approval during the financial year under review.”

The levy is expected to raise billions from the five EAC member states - Tanzania, Uganda, Rwanda, Kenya and Burundi.

The proposed levy is modelled on Kenya’s railway levy that charges 1.5 per cent on imported goods. Proceeds help to build the new Mombasa-Nairobi railway line. The EAC levy sets the stage for price increases, including fuel, food, cars and second-hand clothes, with the potential effect of eroding the purchasing power of most households.

It would also see a dramatic increase in the revenues of the regional body whose budget for the upcoming financial year is Rwf84 billion.

In the budget, the five partner states will contribute Rwf36, while donors will contribute Rwf44 billion.