Irony of lowest inflation in 17 years but Kenyans barely making ends meet

The drop in prices of commodities such as wheat flour, sugar, and cooking oil during this year has failed to offer Kenyans a reprieve in the cost of living, with many surviving on debt.

Data from the Kenya National Bureau of Statistics (KNBS), among other reports, shows how difficult it has been for a majority of Kenyans this year to put food on the table and meet their other needs.

Despite a drop in the prices of commodities in this period compared to last year, Kenyans still have to contend with a high cost of living due to reduced take-home pay as a result of higher taxes.

The easing of the inflation rate this last year has not borne much fruit. The inflation rate in December 2023 was 6.8 per cent compared to the current 2.8 per cent.

An analysis of prices of commodities shows a two-kilogramme packet of wheat flour, a two-kilogramme packet of maize flour, and a kilogramme of sugar and fuel were costlier during the same period last year.

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A kilogramme of potatoes is currently Sh26 cheaper compared to the same period last year. A two-kilogramme packet of white wheat flour is also Sh26 cheaper, retailing at Sh169 with a two kilogramme of sifted maize flour going for Sh134 compared to Sh161 last year.

Petrol that was Sh217 a litre in the same period last year is now Sh176 and diesel has also dropped to Sh165.

A drop in prices of these commodities, unfortunately, has not resulted in less burden for Kenyans whose incomes have been reduced due to new taxes among them the affordable housing levy (AHL), enhanced National Social Security Fund (NSSF), and the Social Health Insurance Fund (Shif).

NSSF’s enhanced contribution went from Sh400 for employee and employer to Sh2,160 a month. Shif then takes 2.75 per cent of gross pay and Affordable Housing Levy yanking another 1.5 per cent.

These new taxes are amidst an economy that is riddled with debt with little room for the private sector to thrive.

NSSF new rates come into effect in February, AHL in March, and Shif in October 2024.

President William Ruto has justified these increases saying they are in line with the Bottom-up Economic Transformational Agenda (BETA).

During the Jamhuri Day celebration, the President said the government has successfully transitioned 5.6 million citizens from the National Health Insurance Fund (NHIF) and registered 11 million Kenyans under the Shif.

“This means that, in just two months, 11 million Kenyans who previously lacked access to healthcare services are now registered, with the registration process going on full steam in every part of Kenya," he said.

According to the President, some of the efforts deployed by the government such as the fertiliser subsidy programme have been key in bringing down the cost of living despite the push for more revenue.

While giving the State of the Nation address, Ruto said his administration has not been watching helplessly as Kenyans struggle with the high cost of living even as he admitted that the country’s economy was on the verge of collapse when he took office and efforts have been made to steer it onto a more promising trajectory.

Bringing down the inflation rate from a high of 9.6 per cent in September 2022 to the current 2.8 per cent is one of the outcomes of these efforts.

This is in addition to stabilising the foreign exchange market.

“This achievement has been the consequence of favourable weather, and our deliberate efforts to support farmers with affordable inputs including subsidised fertiliser, leading not only to increased production but also productivity, and lowering the prices of many cereals, including maize, and pulses such as beans and peas,” he said.

But as the government squeezes more from Kenyans, reports indicate changes in spending with some falling into debt.

The 2024 FinAccess Household Survey by the Central Bank of Kenya, Kenya National Bureau of Statistics, and FSD Kenya, shows an increase in the population that borrowed and defaulted.

“The survey results indicate that the proportion of those who reported to have borrowed and defaulted by not paying at all increased from 10.7 per cent in 2021 to 16.6 per cent in 2024," the report says.

“However, the percentage of those who paid late or missed a payment reduced from 45.8 in 2021 to 37.2 in 2024. In addition, the percentage of those who did not have any form of default increased from 42.6 in 2021 to 45.9 in 2024.”

According to the survey, reducing expenditures on food and non-food items, and using one’s savings are the top three main ways Kenyans are using to get out of debt.

“The most popular action to repay is by reducing expenses on food with females surpassing males by recording 63.0 per cent, and 57.1 per cent respectively.

The least sought action to pay is by selling or giving assets and belongings which saw females record 20.7 per cent and males 23.1 per cent. Males are more willing to part with their assets and belongings as compared to females,” the report says.