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Inflation on the rise in Kenya

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Inflation on the rise in Kenya

Official statistics show that rising food, energy, and transportation costs, which together account for about 57 % of household budgets, have pushed up inflation in Kenya.

Inflation on the rise again after slight dip

In January 2024, inflation in Kenya rose slightly to 6.9 %. The increase is attributed to higher food prices. This follows two consecutive months in which inflation fell below the legal level of 7.3 % in November and December. The latest statistics from the Kenya National Bureau of Statistics (KNBS) indicate that Kenyan consumers are having to dig deep into their pockets to buy basic food items.

Some basic food and fuel indices

Recent statistics, covering the period between December 2023 and January 2024, reveal price fluctuations in various sectors of the Kenyan economy :

  • The KNBS index for food and non-alcoholic beverages increased by 0.4 %. The main cause of the increase in food inflation is the increase in the prices of certain basic products, which exceeds the decrease in the prices of other products, according to KNBS statistics.
  • Between these months, the prices of potatoes, carrots, oranges, and cabbage increased by 10.0 %, 7.4 %, 3.1 %, and 1.7 %, respectively. Mango, tomato, and sugar prices decreased by 3.8 %, 3.6 %, and 2.2 %, respectively.
  • The index for housing, water, electricity, gas, and other fuels increased by 1.6 %, mainly due to increases in electricity prices.
  • The price of a liter of kerosene fell by 2.4 % in the same period, KNBS adds.
  • The transport index declined by 0.9 % over the same period, mainly due to a 2.3 % and 2.5 % decline in petrol and diesel prices, respectively.

The continued weakening of the shilling against the US dollar is also likely to push up the cost of goods, not least because Kenya remains a net importer.

Drivers of inflation in Kenya

The shilling is expected to remain weak and is projected to depreciate further over the medium term. This is against a backdrop of continued demand for foreign exchange from importers, not to mention the impact of high global inflation.

At the end of January, the Central Bank of Kenya valued the shilling at 160.75 to the dollar, indicating that the currency had lost about 29% of its value since the beginning of the year. A volatile shilling means importers spend more on goods such as raw materials for factories. This increases input costs for businesses and passes the burden on to consumers.

In this scenario, an importer will now spend an additional 0.18 USD (29 KSh) to buy 1 USD of imports compared to the same period last year. Since early 2020, when the currency began to depreciate, the shilling has lost about 60 % of its value.

This increase in the cost of living in the East African country comes despite recent projections of a likely decline, according to the Ministry of Economic Affairs. The latest African cost of living rankings place Kenya at 22nd in 2024, down four places from last year.

In general, inflation across sub-Saharan Africa has fluctuated steadily since 2000. In 2022, Statista estimates that inflation will reach 14.49 %, marking the highest annual fluctuation since the 2008 recession. However, inflation is expected to decline steadily in the coming years.

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