Inflation as become the reason to all the problems that have engulfed the Kenyan in the last couple of days. We are all blaming the problem to the ever soaring inflation. One begs to ask; what is the inflation we are talking about and how does it affect us?
Inflation is the general increase in price levels over a given period of time. The Kenyan scenario can be analyzed in four different situations.
The post election violence effects will be here for a while. The effect on food supply is what concerns us. While Kenya’s granary was adversely affected, the distribution channels were also affected immensely. Kenya is largely an agri-based economy and more so substantial. With the food supply patterns affected, the cost of food started to soar with the little available food becoming golden; the effect- inflation that was demand driven.
Then came the coalition government and there was a ray of hope to the end of senseless killings and violence witnessed at the start of the year. But wait a minute; a cabinet of 40 members? What of the commissions of inquiries? You will tell me that they were all inevitable for healing a broken nation. I agree. The poor Kenyan, bearing the cost of high food prices was to further finance it all through taxes the result of which was higher food prices as the tax man tightened his belt. This further contributed to the Inflation.
Before the dust settles, the global crude prices started soaring hitting a high of over $140 per barrel in May. Most of the Kenyan industry operations largely depend on fuel to drive them. Thus fuel costs are a direct cost in their operations. With the margins becoming thinner and the pinch of inflation being felt, it was inevitable for the firms to break even to remain in business. Transport costs too started soaring. Cost push inflation was recorded.
Is the inflation pressure going to ease down? In my opinion when the causative factors rescind, then we may. However, increased Government spending may not go down. There is also a ray of hope as the Government is intervening using long term policy measures- subsidies on fertilizer, seed and farm implements is one such way.
We need to adjust our spending habits and conform to the new ways.
