Drought worsens the cost of living

Kiambu,

Monday, October 1, 2023

KNA by Oduori/Njoki

Four counties, Kiambu, Nairobi, Kajiado, and Mombasa spend less than 50 percent of their income on food and this could be attributed to food distribution.

The rest of the counties spend about two-thirds of their income on food with the highest food expenditure being in Turkana at 76.2 percent and Wajir at 71.0 percent.

According to The Kenya Economic Report (KER) 2023 annual report prepared by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) and launched yesterday, the highest cost of food is attributed to the cost of transport, drought, and increase in farm inputs.

The Economic Report, whose theme is 'cost of living and the role of the market comes at a time when policymakers are seeking evidence for informed policy decisions to manage the cost of living considering that the economy has experienced shocks emanating from prolonged drought and the spillover effects of external shocks such as the Russia/Ukraine war that disrupted global food and commodity supply chains. 

Quoting the Financial Access (FinAccess) survey in 2021, where households were asked to mention an event that had the greatest shock on their incomes in the 12 months to the survey, the report notes that the high cost of living was the main income shock to the majority of households.

“In the last 12 months, 55.5 percent of households who suffered income shocks attributed this to the high cost of living. Other major income shocks that households faced include health-related issues at 17.8 percent while loss of employment stood at 11.2 percent. 

For Kiambu County a cosmopolitan, income shocks such as high-cost living accounted for 53 percent with residents from various sub-counties decrying the high cost of living as the trigger for the opposition-led demonstrations experienced in the last two months, job losses stood at 18.1 percent while health-related income shocks stood at 18.5 percent.

The most popular coping strategies to income shocks by households, the report said were reducing expenses and getting assistance from friends and family.

“About 24 percent of households who experienced income shocks adjusted their consumption patterns by reducing spending which implies consuming and spending less on nutritional food items.

And about 23 percent of households who encountered income shocks relied on assistance from family or friends. Other important coping strategies include disposing of assets such as livestock (10.7 percent), drawing on savings (10.1 percent), and getting additional jobs (8.6 percent).

Borrowing was also used as a coping strategy. However, borrowing from informal channels was more popular compared to borrowing from main banking institutions.

On domestic trade, counties witnessed huge variations in average unit retail prices for consumer cereals such as beans and also disparities in average dry maize prices across various markets in counties.

For Kiambu, the major import sources for various commodities last year, such as dry beans stood at Sh.110 per kg while the maize was at Sh. 61.9 per kg.

Prof. Njuguna Ndung’u, Cabinet Secretary of the National Treasury and Economic Planning said that the Kenya Economic Report 2023 provides policy recommendations to strengthen measures to address the cost of living, including adopting timely and adequate monetary policy interventions; scaling up investment to boost agricultural production and expand agro-processing to smoothen food supply.

 “The Government is committed to lowering the cost of living and ensuring that Kenyans live a decent life in line with the Bottom-up Economic Transformation Agenda (BETA)”, he said adding that the report therefore, provides rich and timely evidence to policymakers in addressing the high cost of living in the country and called upon all the stakeholders to consider the policy recommendations provided in the Report.

Kenya experienced a high cost of living in 2022, with monthly inflation rates increasing from 5.1 percent in February 2022 to 7.1 percent in May 2022, before crossing the government's upper target band of 7.5 percent in June 2022. Thereafter, the inflation rate steadily accelerated to 9.6 percent in October 2022 before easing to 9.2 percent in February 2023.

This year Kenya's economy is projected to grow by 5.5 percent and above 6.0 percent over the medium term. This growth will be reinforced by the Government's Bottom-Up Economic Transformation Agenda geared towards economic turnaround and inclusive growth. 

Courtesy; KNA