Inflation, that reached 28.4% in October 2008, is posing a big threat to Kenya as it is creating a shortage of food, disruption in supplies and high energy costs.
The National Bureau of Statistics said Kenya, the biggest economy of East Africa, is suffering from running inflation that reached 28.4% in October 2008 from 28.2% in previous month (September 2008), as reported by Bloomberg.
Commodity prices in the month of October 2008 soared 1% and food prices rose 1.4%. Moreover, rising prices of wheat flour, English potatoes, beans and other food items flared up the prices of food and non-alcoholic drinks. But underlying inflation that does not include food items in the Consumer Price Index (CPI) basket slumped from 13.35% in September 2008 to 13.0% in October 2008.
Rising food and soft drink prices is a prime reason for spiraling inflation in Kenya. Food production in the country was severely hampered by high energy costs, leading to food crisis. The situation was further worsened by low rainfall in many parts of Kenya, which, in turn, increased the food prices in the country.
In addition, post-election, law and order situation in Kenya got out of control which reduced productivity in many key sectors, thus fueling inflation. The challenges arising in supply of goods at the beginning of the year created more problems and raised the food and fuel prices.
High living cost is viewed as a great challenge, pushing lower middle income segment into low income bracket, a situation that may disrupt the Kenyan government’s efforts of reducing poverty. However, inflation is expected to come down to 20% by January 2009. The reason for this forecast is improving food supplies and falling global crude oil prices.
According to a Research Analyst at RNCOS, “Inflation in Kenya surged very high in October 2008 due to rising food prices, high energy cost and disruption in supplies of essential commodities. It has a bad impact upon the country’s economy and created the situation of food crisis. However, inflation is expected will come down in future. It will help many industries to grow and encourage people to make purchases.”
