Drought pushes inflation to 9.04pc in Feb, bursting CBKs upper target

The ongoing drought continues to pile pressure on the cost of living, with food costs soaring during the month of February.

Data from the Kenya Bureau of Statistics (KNBS) shows that Kenya’s inflation rose to 9.04 in February, bursting the government’s upper target of 7.5 percent.

Inflation has been steadily rising since 2016.

Most food prices rose during the month, with the food and non alcoholic beverages index shooting up to 3.28 percent on the month and 16.50 percent since January.

For instance the price of a two kilogram packet of maize rose eight percent to Sh126.80 while a kilogram of sukuma wiki (kale) rose 11 percent to Sh54.10.

“This was partly contributed by prevailing drought conditions. The year on year food inflation stood at 16.60 percent in February 2017,” KNBS Director General Zachary Mwangi said in a statement.

The government has a target to keep inflation between 2.5 and 7.5 percent.

At the last monetary policy committee (MPC) meeting, the Central Bank OF Kenya (CBK) retained the base lending rate at 10 percent arguing inflation was within the government rate and so no immediate pressure on the economy.

The banking regulator however raised concern that the ongoing drought could place pressure on the economy, adding that it would continue monitoring the situation.

“The Committee concluded that inflation was expected to remain within the Government target range in the short term. However, the Committee noted increased uncertainties with regard to the prevailing drought conditions and risks in the global markets,” CBK governor Dr Patrick Njoroge said during the January 30 meeting.

The government has already declared drought a national disaster with 3 million Kenyans at risk of starvation.

Energy prices remained relatively low despite a steady rise in fuel prices.

Water levels at the country’s hydro power stations have been dropping but Kenya Power and the Ministry of Energy and petroleum have ruled out power rationing.

The Nairobi Water and Sewerage Company has from January 1 been implementing a water rationing program as water levels at Ndakaini dam and other water catchment areas dropped.

Standard Chartered chief economist for Africa Razia Khan said the inflationary spike will be of concern to the regulator with need to implement measures to contain it

“While this is likely to be food related, it does create a dilemma for the central bank,” Ms Khan said in a statement.