Inflation drops to 6.7pc despite rise in power and rent prices

Inflation has dropped to 6.7 per cent. The recent tax hikes have eroded the spending power of many Kenyans. [Omondi Onyango, Standard]

Kenya’s inflation has dropped to 6.7 per cent in August from 7.3 per cent in July, according to the latest official data.

This is despite an increase in the prices of basic commodities such as electricity, and rents as well as the high prices of fuel.

The Kenya National Bureau of Statistics (KNBS) admitted in a statement most consumer goods recorded a jump in prices even as it indicated the overall cost of living measure had eased marginally.

"The overall year-on-year inflation rate as measured by the Consumer Price Index (CPI) was 6.7 per cent, in August 2023," said KNBS Director General McDonald Obudho in a statement.

According to the latest CPI published on Thursday, KNBS, however, noted there was a general rise in the cost of basic commodities.

"During the reference month, all sectors continued to record general increase in prices," said Mr Obudho.

"Prices of commodities under transport; food and non-alcoholic beverages; and housing, water, electricity, gas and other fuels, increased by 13.1, 7.5 and 7.5 per cent respectively between August 2022 and August 2023."

KNBS said the prices of most food products dropped during the period.

It singled out the prices of maize grain-loose, maize flour-loose, fortified maize flour, potatoes and tomatoes, which it said decreased by 8.2, 7.3, 6.1 and 3.5 per cent respectively between July and August this year.

KNBS acknowledged the prices of electricity went up, with the cost of 200-kilowatt hour (kWh) and 50 kWh going up by 1.5 per cent and 1.8 per cent respectively.

According to KNBS, the prices of petrol and diesel remained unchanged between July and August.

This saw the transport Index go up by 0.3 per cent during the period, mainly due to an increase in prices of country bus fares for some routes.

At the same time, the price of a 13kg liquified petroleum gas (LPG) decreased by 2.8 per cent between July and August.

The Kenya Kwanza administration, which took over last September, has been under pressure to bring down the cost of living.

However, some of its proposed tax and policy measures have been questioned by various interest groups, stoking social tensions.

The Court of Appeal recently paved the way for the implementation of the controversial Finance Act, 2023, signalling more pain for consumers at a time when inflation has eroded the buying power of many Kenyans amid a weakening shilling.

It emerged recently that the National Treasury Cabinet Secretary Njuguna Ndung’u will be in hot soup if he fails to help the government address the high cost of living.

Prof Ndung’u could lose his job for failing to maintain the inflation rate – which measures the cost of living – within the government’s target and preferred range of 2.5 per cent to 7.5 per cent.

This is part of the stringent conditions set by President William Ruto for his top money man as he moves to enhance personal responsibility for his top ministers. 

“To ensure macroeconomic stability and growth is maintained, the Cabinet Secretary will: develop and implement a macroeconomic framework that fosters; a strong economic growth of 5.5 per cent in 2023,” says part of the performance contract signed by the CS.

“(He will) collaborate with the Central Bank of Kenya to maintain the inflation rate at five per cent +/-2.5 per cent.”

The prices of key food items have increased significantly over the past couple of months, adding pressure on cash-starved households still reeling from the economic hit of the Covid-19 pandemic.

The shilling has been under pressure against the dollar, setting up the country for more expensive imports and debt servicing distress.

The CBK quoted the shilling at 145.5088 to a dollar Friday. The weakening of the shilling has triggered fears of a fresh round of inflationary pressure.

This is because the country relies on imports for key industrial inputs such as fuel and raw materials like wheat and edible oil, as well as farm inputs like fertiliser.

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