Experts: Why your pockets are still empty despite lower prices

Kenyans are finding it harder to make ends meet despite government data showing the economic situation has improved in the last two years.

Several experts have weighed in on this paradox between the micro and macro indicators, which has left many Kenyans unable to translate the low inflation and improved exchange rate into better living standards.

Numbers presented by National Treasury Principal Secretary Chris Kiptoo at a recent discussion with economic experts showed how the prices of basic items such as sugar and wheat flour have gone down over the last 12 months.

Dr Kiptoo said these indicators should loosely translate to more money in Kenyans' pockets.

“These are basic commodities. Clearly, if you had Sh100, it is worth more now than before,” he said during the DTB Economic and Sustainability Forum in Nairobi.

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These numbers, however, were not enough explanation to Institute of Economic Affairs chief executive Kwame Owino, who cited the increased poverty levels according to the Kenya National Bureau of Statistics (KNBS) as a sign all is not well.

Owino argued that the reason behind the low inflation—which stood at 3.5 per cent in February—is depressed incomes.

“The drop, in my assessment, is not because prices have gone down; it is because demand is weak. People do not have income and wages have not been rising,” he said.

He said the macro-indicators tend to give figures for big aggregates. However, food prices over the last five years, have experienced volatile price shocks compared to non-food items growing faster in cost than incomes.

As such, even if prices have reduced, it is not to the level they were back then.

“Kenyans are saying 'yes, there is some relief but it is not substantial'”.

Owino cited the country’ poverty levels which stand at 40 per cent as documented by KNBS, saying 21 million people do not have sufficient funds to feed themselves.

“People are poorer today than they were in the year of Covid. If you take all those things together, Kenyans are saying 'you are giving us very fine numbers but I can’t get enough food'”. h.

According to the  Kenya Poverty Report published by KNBS last year, overall poverty headcount in the country stands at 39.8 per cent.

“This implies that over 20 million individuals were unable to meet the overall poverty threshold,” reads the KNBS report.

Food poverty head count stands at 31.7 per cent. Poverty levels increase when households are stratified in different pockets, rising to over 40 per cent.

“Households with children had higher poverty rates (38 per cent) compared to those with no children (24 per cent). Rural households with children had the highest poverty headcount rate of 41 per cent in this category,” the report says.

“Poverty headcount rate increases with household size across all domains of residence, ranging from a low of 20 per cent of households with one to three members to 60 per cent among households with seven or more members.”

Numbers presented by Kiptoo at the forum show due to low inflation as a result of efforts instituted by the government, a kilogramme of sugar has dropped to Sh161 in January 2025 compared to Sh209 a year before.

A two packet of maize flour is now Sh161 from Sh175, wheat flour has moved from Sh195 to Sh169 and kerosene is now Sh152 from Sh194.

However, looking back, a litre of kerosene that now goes for Sh152 was selling at Sh88.07. Diesel then was also retailing at Sh97.

A 400g loaf of white bread was averaging Sh50 but is averaging Sh65 today. Then a 1.5kg loaf of bread was less than Sh200 and today the same is Sh230.

“I want to give numbers because sometimes people say we do not see this inflation. Is it really affecting the pockets of Kenyans?

"The truth is this: in January 2024, a kilo of sugar was Sh209, and January this year is at Sh161. We have had a reduction of 23 per cent in prices of sugar,” said the PS.

He noted that the economy has done well on macros, referencing the liquidity challenges the country was in back in 2022.

“Some may say I am painting a bad picture but I think I am right to say the worst is over and the future is brighter,” he said.

In September 2022, when the Kenya Kwanza administration was taking office, during the height of liquidity challenge and a shilling that was spiraling helplessly against the dollar, inflation stood at 9.2 per cent—1.7 per cent above the Central Bank of Kenya range of 5+/-2.5 per cent.

The slow effect of these glossy figures on Kenyans’ pockets, according to Old Mutual Investment Group managing director Anthony Mwithiga, is based on how markets work, where macro-indicators always precede micro.

“Markets always move ahead of behaviours and habits,” he said during the launch of the 2024 Financial Services Monitor by Old Mutual.

“For that reason, the supposedly impressive macro-indicators have improved faster than how our wellbeing has caught up."

He noted that since well being is driven by emotions, fear and habits, it means if you felt economically challenged early in the year and in 12 months things seem economically comfortable from the indicators, it means you have built a habit of being careful, being sensitive to your costs and saving more.

"And for that reason, we do always see that lag (between macro and micro economic indicators)," he said.

According to the 2024 Financial Services Monitor, due to the difficult economic times, almost half of employed Kenyans were depending on side hustles as their main source living pointing to how strained Kenyans’ pay slips are.

Mwithiga explained that those who have invested in the stock market felt this boon in economy at the macro level.

“Most of us in the room, there is a chance no one bought a share in the stock market last year. But last year the stock market had very good returns," he said.