Inflation goes up in August as fuel, food costs spike

A grocery stall on the outskirts of Nairobi. [File, Standard]

Kenya’s overall inflation in August 2021 rose to 6.6 per cent from 6.5 per cent in July, the Central Bank of Kenya has revealed.

High costs of fuel and foodstuff pushed up the inflation rate, CBK Governor Patrick Njoroge said in a statement on Tuesday, September 28.

According to the new data, fuel and food inflation spiked to 9.2 per cent and 10.7 per cent respectively. In July, food inflation stood at 9.1 per cent.

“This was mainly attributed to dry weather conditions and supply constraints,” said Njoroge, revealing that the most affected commodities are tomatoes, cabbages, Irish potatoes, cooking oil (salad), beef with bones and bread.

“Inflation pressures are expected to be elevated in the near term, mainly driven by increases in fuel and food prices, and the impact of the recently implemented tax measures. However, inflation is expected to remain within the target range with muted demand pressures,” he said.

The CBK boss said the inflation trend has been replicated in other developed economies.

Central Bank of Kenya Governor Patrick Njoroge. [File, Standard]

“Inflation in some major economies and emerging markets has risen sharply, mainly due to increases in global oil prices, supply chain bottlenecks, and weather-related factors,” he said.

Njoroge says certain aspects of the Kenyan economy have, however, been resilient on the back of the Covid-19 crisis.

“Exports of goods have remained strong, growing by 11.5 per cent in the period January to August 2021 compared to a similar period in 2020. Receipts from exports of horticulture and manufactured goods rose by 25.0 per cent and 39.1 per cent, respectively, in the period January to August 2021 compared to a similar period in 2020.”

The governor said there are indicators that Kenya’s economy could bounce back soon.

“The leading indicators for the economy point to a strong GDP recovery in 2021, mainly supported by robust performance of construction, manufacturing, education, real estate and transport and storage sectors.”

According to Njoroge, the CBK has put in place mitigation measures to cushion the economy against foreign exchange shocks.

“Foreign exchange reserves, which currently stand at USD9,450 million (5.78 months of import cover), continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.