Monday twenty fourth February, 2025 08:20 AM|
Despite the Kenya Kwanza administration’s pleasure within the current stability of the Kenyan shilling, indicators reveal a extra complicated actuality, even after the foreign money strengthened after the Central Bank of Kenya (CBK) intervened.
The apex financial institution has applied a collection of financial coverage measures geared toward lowering the price of dwelling by making borrowing extra inexpensive.
Between August 2024 and February 2025, the CBK lowered its benchmark lending price from 12.75 per cent to 10.75 per cent, marking 4 consecutive price cuts. Additionally, the Cash Reserve Ratio (CRR) was lowered from 4.25 per cent to three.25 per cent, successfully releasing roughly Sh57 billion in liquidity for banks to increase as credit score.
These measures are designed to encourage industrial banks to lower their lending charges, thereby growing entry to credit score. Increased entry to credit score is predicted to spice up financial actions, improve manufacturing, and probably result in decrease costs for items and companies, contributing to a lowered price of dwelling. Despite these efforts, the CBK has noticed that lending charges haven’t declined considerably, prompting on-site inspections to make sure banks adjust to the brand new coverage measures.
By easing financial coverage and growing liquidity within the monetary system, the CBK goals to assist financial progress and alleviate the monetary burden on Kenyans, striving to make important items and companies extra inexpensive.
The shilling remained steady towards main worldwide and regional currencies, throughout the week ending February 21. It exchanged at Sh129.58 per greenback, in comparison with Sh129.21 per US greenback the week of February 13, having hit an all-time excessive of over 160 towards the greenback in March 2024.
While the Central Bank of Kenya (CBK) experiences a decline in inflation to three.3 per cent for January 2025, which is beneath its benchmark price of 5 per cent, many Kenyans proceed to grapple with excessive dwelling prices and elevated meals costs.
For occasion, in February 2022, a 1kg packet of sugar was priced between Sh124 and Sh138, with the shilling buying and selling at Sh120.54 to the greenback and an inflation price of 5.08 per cent. Lower inflation price As of January 2025, regardless of the shilling strengthening to roughly Sh129 towards the greenback, the identical packet of sugar averages Sh160 in main supermarkets. This worth enhance persists even because the CBK experiences a decrease inflation price.
Similarly, different important commodities have skilled worth hikes over the previous two years. In January 2023, the price of a 2kg packet of maize flour was round Sh120. By January 2025, this worth had risen to roughly Sh150, reflecting a big enhance regardless of the reported decline in inflation.
Speaking to Business Hub, Stacie Karegi, a Nairobi resident, complained of the present excessive meals costs which have compelled her to spend extra for her family.
“Things are tough. the prices of products when you compare them with the previous year, they are increasing. For instance, last year in November we were getting a 2kg maize flour from as low as Sh120, for a good brand, now we are talking about Sh160 of the same. for a 5 litre cooking oil, it was retaining at about Sh1,100 during the same period, now I’m buying it from Sh1,500, the Ps statement is unrealistic,” she complained.
Violet Rudia, an informal labourer in Nairobi, agreed that the costs of commodities within the nation have lowered in comparison with final yr though remaining excessive in comparison with 5 years in the past.
“For now, I can say that on my end things have started becoming affordable for instance, you can get a Sh140 of maize flour, a 2 kg that is, compared to 2023 when they were at Sh210. This I think has also been influenced by the fertiliser subsidy initiative,” she stated.
However, National Treasury Principal Secretary Chris Kiptoo argues that authorities interventions have alleviated the price of dwelling.
He states: “I’m happy because when I look back, so much has happened. I think I am right to say that the worst is over and the future is brighter. Inflation has come down not just because of CBK but also due to a combination of what we have done at the National Treasury.”
Economist Kwame Owino, nonetheless, affords a distinct perspective in his evaluation of the economic system. While he acknowledges the decline in inflation, he notes that it hasn’t translated into improved demand for items and companies.
Owino factors out that whereas costs are lowering barely now, they’d beforehand risen sharply over the previous 5 years, outpacing earnings progress.
He remarks, “Over the past five years, if you look at the inflation basket, food inflation has really been hiking at a high rate. Irrespective of the fact that prices are dropping, they rose at higher levels than incomes.”
“If you measure the poverty levels today, Kenyans are poorer than they were in the year of Covid-19 and so if you take all those things together, Kenyans are not guessing, they say, fine you are giving us fine numbers but I cannot afford enough food. Poverty rate means that at 40 per cent, 21 million people do not have sufcient funds to feed themselves,” Owino added.
“What I must say is that Kenyans, we have serious work to do and we cannot wipe away this thing with flowery language and PR messages.”
The disparity between official inflation figures and the lived experiences of Kenyans could be attributed to a number of components.
Inflation charges are calculated primarily based on a basket of products and companies, and whereas some gadgets could have stabilised or decreased in worth, important commodities like meals have seen vital will increase. Global occasions have additionally had a direct impression on native meals costs in Kenya, contributing to the disconnect between reported inflation charges and the precise price of dwelling.
While the shilling has proven stability, the advantages of a stronger foreign money haven’t essentially trickled all the way down to customers. Importers should still be coping with larger prices from earlier intervals of foreign money weak spot, and these prices are sometimes handed on to customers.
Additionally, home components akin to taxation, manufacturing prices, and distribution inefficiencies proceed to affect retail costs.