Cost of living set to go up as high fuel prices weigh in

Besides, the meteorological department has predicted depressed and poorly distributed rainfall during the March-May long rain season.

Political temperatures are also rising fast as the country gears up for another crucial transitional General Election. The outlook seems gloomy.

"Achieving a single digit inflation under the current environment is quite ambitious. Probably the government should hope for about 10 per cent considering also where the country is coming from," said Stanley Ngaine, the chairman of Sterling Capital Ltd.

Ngaine said since the international fuel prices are on the rise and projections of insufficient rainfall means the country cannot avoid imported inflation.

In recent months, the prices of crude oil on the international market have recorded significant surge from $114 per barrel in January to $127 per barrel last month, which translates to 11.2 per cent rise.

In terms of refined petroleum products, the price of petrol has surged by 16.9 per cent $975 per tonne in January to $1,140 per tonne last month while diesel has increased by 7.1 per cent, from $1,011 per tonne in January to $1,086 per tonne.

The trend, which is expected to continue in the coming months as tensions in the Middle East intensify due to Iran’s controversial nuclear programme that has seen the UN Security Council impose more sanctions to the country.

The instability in Nigeria and halting of oil production by South Sudan, has not only resulted to a return of rising pump prices but will instigate a return to high energy costs.

Thermal power

With KenGen being on record that the current rains are inadequate and will not fill the dams, the country could be headed for expensive thermal power generation to meet the rising demand hence higher charges and inflation.

Kenya is a net importer of petroleum, which accounts for about 22 per cent of the primary energy sources and the demand has been growing steadily at an average of 10 per cent over the past decade.

The country’s petroleum import bill stood at a staggering Sh166 billion as of June last year, equivalent to $100,000 barrels per day.