Commodity Watch

Price Hikes in Volatile Foods Makes February Inflation Untamed

BY Soko Directory Team · March 2, 2017 11:03 am

Just after the severe drought has been declared a national disaster, it has seen a lot of commodity prices hike within a short period of time. Agriculture and job availability are severely impacted on by the current drought which extends beyond to hikes in food prices and thus the overall consumer inflation.

This has had a bad implication on the interest rates as well as the national income growth.

Even though the setback in the agricultural sector has had an overall impact on the Kenya’s economy growth rate, its impact is most felt by the consumers due to the hikes in prices. Month-to-month the overall inflation rate is increasing especially that of foodstuffs and non- alcoholic drinks (beverages), namely: collard greens, maize flour, milk, cabbages, spinach, potatoes and maize grain.

Also the cost rising at a faster pace for housing, water, electricity, gas and other fuels that have risen to 0.4% from 0.33% mainly due to increases in electricity, house rents and charcoal; and transport (0.74% from 0.6%), report by the Kenya National Bureau of Statistics.

In February, 2017 there has been a slight increase of 2.05% on the previous month’s 6.99%. It’s the highest inflation rate since June 2012 as prices have continually rise sharply on food and beverages. In Kenya, the Consumer price Index (CPI) is based on expenditures of both urban and rural households, the extremism of the drought this year has seen CPI inflation greatly affect consumers in the low income living standards with challenges stemming from weak employment creation given the far greater portion of their income that they must spend on food compared to higher income groups.

High unemployment, the weakening shilling, and the increased interest rates are anticipated to put the spending ability of the Kenyan consumers under even more pressure in the short term and long term. Drought has affected the country at a whole, most Kenyan have now started spending the bulk of their income on food, and the expected food prices which increases due to the decline in supply would inevitably push up the proportion of income usually spent on food resulting in a reduction in the expenditure on luxury products- ultimately affecting the entire economy.

The poor performance of the short Rains crops means that most households will not have stocks from their own production and will, therefore, rely on the markets. Given the low supply, retail maize prices and other foodstuffs in the market are expected to increase through 2017. While current prices are near their five-year averages, they are likely to rise above these beginning months, reports the star.

The government has approved sh. 7.4 billion to spend on the second phase of the drought mitigation program. Richard Lesiyampe, the Agricultural principle secretary said the money will be spent between now and April.

The third phase will run from May to July. The government has spent sh5.5 billion to support 1.5 million people who have been gravely affected by the drought. The money was spent on relief food, nutrition, water, animal feed, livestock disease management, drought tolerant seeds and re positioning of strategic food reserve stocks.

But the question is why the government hasn’t put in place long term measures on drought prevention and its impacts rather than using short term efforts and measures which scoops a large amount of money from the Kenya’s economy which instead should have been used in development and growing the Kenyan economy at large.

By Amina Martha

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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