Kenya records highest inflation in 19 months

Tuesday April 30 2019

A vendor arranges her fruits stand at the Top

A vendor arranges her fruits stand at the Top Market in Nakuru on April 10,2019. Drought conditions which prevailed in the better part of April 2019 caused an upsurge in the costs of some foodstuffs. PHOTO | JOHN NJOROGE | NMG 

JAMES ANYANZWA
By JAMES ANYANZWA
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Kenya’s inflation for the month of April rose to 6.58 per cent from 4.35 per cent in March, the highest increase in cost of living in 19 months.

The inflation was triggered by high food and fuel prices according to data by the Kenya National Bureau of Statistics (KNBS).

The last time Kenya’s overall month-on-month inflation grew beyond six (6) per cent was in September 2017 when the growth in the general level of prices of goods and services in the country stood at 7.06 per cent.

The statistics body attributed the spike in food prices to increase in pump prices for petrol, diesel and kerosene and drought conditions which prevailed in the better part of April 2019 causing upsurge in the costs of some foodstuffs.

For instance, retail prices for sifted maize flour and kales (Sukuma wiki) increased by 30 per cent and 25 per cent respectively during the month of April compared to March.

The prices of potatoes, tomatoes and cabbages increased by 19 per cent,15 per cent, and 12 per cent respectively during the same period.

During the period under review the prices per litre for fuels such as petrol, diesel and kerosene increased by 5.32 per cent,5.77 per cent and 2.17 per cent respectively.

Kenya government has set an inflation target of five (5) per cent with an accepted range of between 2.5 and 7.5 per cent.

However, if the inflation spills out of the government’s upper limit of 7.5 per cent the Central bank governor Patrick Njoroge is expected to write to the National Treasury Cabinet Secretary Henry Rotich and to the parliamentary committee on Finance, Planning and Trade explaining why inflation had deviated from the 5 per cent target by more than 2.5 percentage points.

Dispute

In December 2015 the cost of living rose by 8.01 per cent sparking a dispute between the National Treasury and Central bank over whom is to blame for the escalating cost of living.

The Treasury argued that the Central Bank should be vigilant over all aspects of inflation that causes inflation to rise beyond the government’s upper limit of 7.5 per cent but the banking regulator said it can could only police risks that arise from excess liquidity in the market or what insiders call demand side factors.

“If you are telling me that we should direct our monetary policy on the price of Sukuma wiki and the price of tomatoes, I will tell you maybe you should go and study the Sukuma wiki market and then we can talk.

“In that sense, we know what the underlying dynamics are and we are comfortable because those are weather-related and there is a bit of movement now and then but we know the direction they will stabilise,” Central Bank Governor Dr Patrick Njoroge said in 2016.

Treasury Cabinet Secretary Henry Rotich, however, said Central Bank is responsible for managing all aspects of inflation.

“It is not a question of who is responsible for what kind of inflation. The debate of headline and core inflation is gone and it is not fashionable today. Monetary policy affects the supply and demand sides of inflation,” said Mr Rotich.

Weather conditions

Analyst at the Africa focused financial advisory firm StratLink said adverse weather conditions experienced within the East African region poses risk to the inflation prospects.

“Rainfall patterns between October last year and now indicate the prevalence of moderate to severely dry conditions over much of the Greater Horn of Africa,” according to the analyst through their Market report for April.

“In April 2019 there is a high likelihood of seeing drier than average conditions over much of Uganda. The prevailing weather is likely to lead to a higher food prices and upward pressures on inflation.”

According to StratLink Kenya faces inflationary pressures due to the recent spell of dry weather that has continued into the month of April pushing food prices upwards.

The average overall inflation for Kenya, Tanzania, Uganda and Rwanda during the three months to March 2019 stood at 2.9 per cent compared to 2.93 per cent in the same period last year (2018).

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