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Inflation shoots to 9pc

Food prices accelerated due to prolonged drought.

The ongoing dry spell in the country has spiked the cost of living to a high of 9.04 per cent following a sharp increase in the prices of food including sukuma wiki, milk, potatoes and maize flour.

Most families will not be able to afford the same quantities of food enjoyed last month as inflation starts to bite, according to Kenya National Bureau of Statistics (KNBS) data from February.

A kilo of sukuma wiki will now cost Sh54.10 compared to Sh48.70 in January, while sifted maize flour will cost Sh126.80 from Sh119.6. KNBS’ national average retail price estimates show that the cost of a kilogramme of potatoes also went up to Sh85.80 from Sh82.30 in January, affecting delicacies such as chips and crips.

This drastic increase in inflation, which has now busted the government’s target range of between 2.5 per cent and 7.5 per cent, was also caused by an increase in the cost of fuel in February.

The Energy Regulatory Commission (ERC) announced an increase in the fuel retail prices as the petrol increased by Sh4.26 per litre, diesel by Sh5.03 per litre and kerosene an extra Sh3.75 countrywide.

This comes as the Central Bank’s Monetary Policy Committee (MPC) estimated in January that inflation would remain within the government target range in the short term. But the committee also noted increased uncertainties with regard to the prevailing drought conditions, coupled with risks in the global markets, as major economic concerns.

The MPC retained the Central Bank Rate (CBR) at 10 per cent to anchor inflation expectations as it continued to monitor developments in the domestic and global economies, and assured to take additional measures as necessary. Economists warned last month that the drought would exert pressure on prices.

Britam Asset Managers analysts Brian Chege said unfavourable climatic conditions and drought are expected to affect agricultural productivity, increase electricity costs and reduce the water availability.

“We expect the above factors to culminate in upward pressure on overall inflation in 2017. Inflation will, therefore, trend towards the upper range of CBK’s target of 7.5 per cent,” he said during the launch of an economic outlook on February 3.

In January last year, a two-kilogramme packet of maize (sifted) flour was retailing at around Sh98 but the commodity is now going at about Sh120. A one-litre can of cooking oil has increased to an average price of Sh200 in January from an average of Sh192 in 2016.

The cost of a two-kilogramme packet of sugar was Sh270 during the period, but has since risen to Sh300 in most retail outlets, while a packet of milk (500ml) has somewhat stagnated at the same price over that period at Sh54.

Amid looming general elections, the biting drought, increasing cost of fuel and low credit from financial institutions could stretch the cost of living further.

However, with signs of imminent rains, the resultant harvests could help leverage the cost of basic foodstuff, easing the burden for most households.

The post Inflation shoots to 9pc appeared first on Mediamax Network Limited.

This post was syndicated from Mediamax Network Limited. Click here to read the full text on the original website.

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