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kenya inflation

Taxing the poor… through inflation

Wolfgang Fengler's picture

Imagine you are spending half of your income on something whose price suddenly increases by a quarter. Seems impossible? This is how in fact inflation has hit the poor in many developing countries, especially Kenya.

This September, overall inflation reached a record high of 17.3 percent. One year ago it was just above 3 percent. Why has it increased so sharply even though Kenya has followed prudent macro policies? The short answer is: food and fuel. In Kenya, food accounts for 36 percent of the average person’s expenditures; energy and transport another 27 percent. The urban poor spend more than 43 percent on food. Since January, food prices have increased by almost 25 percent (see figure), partly as a result of international trends but also due to Kenya’s- agriculture policies. Maize prices tripled between January and June until they retreated a little once the government waived import duties and the 2011 harvest started trickling in.