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Kenya inflation rose to 9.2% in September
Overall annual inflation in Kenya remained elevated at 9.2 per cent in September from 8.5 per cent in August, driven mainly by food and energy prices. Food prices rose to 15.5 per cent while energy prices increased 11.7 per cent in the same period. Private Investor and Analyst, Mihr Thakar spoke to CNBC Africa for more.
Mon, 03 Oct 2022 10:46:48 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Imported inflation from advanced economies driving up prices in Kenya
- Local factors contributing to inflation include rising import and input costs for manufacturers
- Gradual rate increases by the CBK supported by positive private sector credit growth and economic optimism
In Kenya, the overall annual inflation rate surged to 9.2% in September, up from 8.5% in August, driven primarily by soaring food and energy prices. The significant increase in food prices soared to 15.5%, while energy prices jumped by 11.7% during the same period. Private Investor and Analyst Mahir Takar shed light on the situation in an exclusive interview with CNBC Africa. Takar highlighted the fact that a considerable portion of inflation in Kenya stems from imports, particularly oil, machinery, and other goods brought in from advanced and resource-rich economies. While acknowledging the impact of imported inflation, Takar emphasized that there are also local factors at play, such as non-food and non-fuel inflation, which escalated to 3.2% in August 2022 from 1.9% in January 2022. The surge in local inflation is attributed to rising import and input costs for manufacturers, coupled with perceived scarcity of goods in the market. Despite the Central Bank of Kenya's cautious approach to rate increases, Takar believes that a balanced strategy is essential to address both imported and local inflationary pressures. He noted that the government's focus on fuel and food prices aligns with the inflation data, but urged for a nuanced approach to monetary policy. With regards to the impact of the CBK's rate hikes on inflation, Takar highlighted positive trends, such as the significant growth in private sector credit from 6.1% in July 2021 to 12.5% in August 2022. He emphasized that the economy is currently in a robust position to absorb gradual rate increases without immediate adverse effects. When questioned about the government's projected elevated inflation for the rest of the year and the potential need for price interventions, Takar expressed reservations about the government's fiscal capacity, citing a high debt service to revenue ratio and limited budgetary room for extensive interventions. Amid global economic trends, including Federal Reserve rate hikes and soaring inflation in the eurozone, Takar cautioned about the impact on Kenya's access to international capital markets. Rising risk premiums in developed markets could hinder Kenya's ability to borrow commercially, leading to increased reliance on concessional loans from institutions like the World Bank. He also highlighted the challenges posed by high debt service to export ratios, urging prudent management of debt obligations. Despite concerns about negative spillovers from global inflationary pressures, Takar expressed optimism about Kenya's export resilience, particularly in products with inelastic demand like tea and coffee. While acknowledging potential challenges in luxury exports like horticultural products, Takar remained hopeful that the impact would be contained to specific segments of the market. In conclusion, as Kenya grapples with mounting inflation and external economic headwinds, stakeholders like Takar stress the importance of a balanced policy approach to sustain economic stability and growth.
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