Kenyan households are facing financial difficulties after soaring commodity prices amid soaring inflationary pressure, a weaker shilling and rising temperatures ahead of the August 8 general election .
AZA Finance analysts said high inflation due to rising global commodity prices weighed heavily on the local currency, which fell to a new low of 114.55 Ksh ($1) against the dollar. last week, compared to 114.33 Ksh the previous week.
The situation was aggravated by the increase in fuel prices (gasoline and diesel) by 5 Ksh ($0.04) per liter by the Energy and Petroleum Regulatory Authority.
“Meanwhile, political temperatures are heating up ahead of the August election. Given this uncertainty and inflation concerns, we expect the shilling to continue to weaken in the near term,” the analysts said in their daily market report released on March 24.
The world crude price, which hit $130 a barrel on March 8, fell to $121.02 a barrel on March 24.
Last week milk processors in Kenya raised prices from Ksh2 ($0.01) to Ksh5 ($0.04) for a 500ml pack of fresh and shelf stable brands, adding to a growing list of commodities whose prices have increased recently. weeks, including bread, cooking oil, sugar, wheat and corn flour. Other items whose prices have increased are steel and cement.
The Kenya Transporters Association has advised its members across the country through a notice dated March 14 to raise freight rates by at least 5% to sustain their business under the current circumstances and avoid a total collapse. .
Last week, the Consumers Federation of Kenya asked Parliament to consider abolishing the value added tax on liquefied petroleum gas or reducing it to 8% from the current 16%.
Russia’s invasion of Ukraine has disrupted the supply of oil, fertilizer and wheat, which has driven up the cost of commodities around the world.
High oil prices, compounded by limits on Russian oil exports, have increased the cost of importing refined oil, putting pressure on African foreign exchange markets, with net importers such as Kenya bearing the brunt.
Kenya’s weaker currency creates more inflationary pressures, pushing up the cost of imports and raising debt servicing issues.
According to the Kenya Manufacturers Association (KAM), the increase in oil prices has a ripple effect on the economy as the cost of transportation and production will rise, leading to an increase in the cost of finished products, including including common household products.
“Most sectors of the manufacturing industry will be strongly affected by the increase in oil prices due to the increase in production and transport costs. The country is still reeling from the impact of the pandemic. The cost of living has increased dramatically, while the purchasing power of citizens is decreasing,” said Phyllis Wakiaga, Managing Director of KAM.