Kenya worst hit by rising global food prices in region
Kenyan consumers have been listed as hardest hit by rising food prices in the region. Photo/HEZRON NJOROGE
Rising food prices in the international markets is hurting Kenyan consumers more than in any other Sub-Saharan African country, a survey by the IMF shows.
The International Monetary Fund (IMF) study indicates it is only in Kenya where the increases were felt wholly by consumers.
The situation was made worse by the rising oil prices whose knock-on effects have depreciated the local currency, multiplying costs for a country that is a net food importer.
“On average, the cumulative impact of a 10 per cent increase in international food prices on domestic food prices is three per cent. But the effect ranges from a full 10 per cent pass-through in Kenya and Guinea-Bissau to very limited or even no pass-through in Nigeria and Ghana,” said IMF in a report released on Tuesday.
Food experts are attributing the strong impact on Kenya to consumption patterns in the region.
Dr Mary Mathenge, the director at Tegemeo Institute of Research at Egerton University, said the high pass through was likely linked to consumption patterns.
In Kenya, she noted, the main food commodities are maize, wheat and rice, which are all tradable in large scale at the international markets — a situation which exposes the country to any adjustments.
“Our staple foods are exposed to changes in the international markets whereas other countries could be cushioned by the basket of foods they consume,” said Dr Mathenge.
Food production was dampened by failed rains in the second half of last year with imports being used to plug the shortfall.
Since the last harvest last year, the price of a 90 kilogramme bag of maize — Kenya’s staple — has tripled to an average price of Sh3,000, with the government being forced to scrap a 50 per cent import duty to tame the rise.
The Food and Agriculture Organisation (Fao) of the UN estimated Kenya’s maize production in the 2009/10 year at 200,000 tonnes, which is about half of the consumption demand.
IMF says the level of pass-through on higher food prices in the international markets onto the local consumer was set to influence inflation- a situation that is already manifest in Kenya as the April rate jumped to a 17-month high of 12.05 per cent.
“The degree of pass-through is likely to influence the level of inflation. Should prices rise sharply higher than assumed in the baseline, there almost certainly will also be an adverse effect on growth,” added the report.
Bananas for instance are not widely traded in the global food market meaning that there are no contracts on their deliveries- essentially eliminating the chance of sharp price increases when supply is low.
That explains why a 100 per cent increase in food prices internationally would only result in a 15 per cent rise in Uganda, a country whose staple food is bananas.
Dr John Omiti, a senior analyst and head of division (Agriculture) at government think-tank KIPPRA say that the countries sensitivity to international food prices relates to the country’s over-reliance on cereals as the main foodstuff.
Since cereals are non-perishable commodities, they are actively traded in the international markets and are more widely consumed across the globe making their prices more sensitive to supply-instigated pricing shocks.
“We rely on import of cereals which are widely consumed internationally which makes their pricing sensitive to any supply shocks, meaning the local consumer would compete with a consumer from anywhere else in the world,” said Mr Omiti.
Diamond Lalji, the chairman of the millers association said in an interview last week that the country was currently almost entirely dependent on imported maize and called on the Central Bank of Kenya to strengthen the local currency to counter the high prices.
