More than half of Kenyan households cut their spending on food and 10 per cent of homes sold their assets in the race to survive sky-high inflation and economic shocks from the worst drought in 40 years.
This is the verdict of a World Bank survey on how Kenyans coped with the high cost of living, which has remained above the government ceiling of 7.5 per cent since July.
Drought has made food costly and denied income to persons who rely on agriculture, which accounts for nearly a third of Kenya’s GDP.
As a result, 52 per cent of Kenyan households cut their food shopping basket in an environment where companies have frozen salaries as they recover from Covid-19 economic hardships.
About 35 per cent of households reduced consumption of non-food items, which are deemed non-essential, while 10 per cent sold their assets to survive the economic shocks.
“Just under 95 per cent of households used at least one strategy to cope in June 2022. Close to half of households (52 per cent) reduced food consumption and over a third (35 per cent) reduced consumption of non-food items. Some 10 per cent sold productive assets,” said the World Bank on how Kenyans coped in the six months to June.
“Regression analyses reveal that agricultural households cutting consumption to cope with shocks were more likely to be households with young children and those headed by women.”
Kenya’s inflation has since June breached the target range of 2.5-7.5 per cent, prompting the CBK’s Monetary Policy Committee to raise benchmark interest rates to curb consumer spending.
Since May, the MPC has raised the benchmark interest rate by 175 basis points to 8.75 percent, signaling lenders to raise the cost of borrowing.
Increasing the key policy lending rate makes borrowing more expensive, and this is expected to reduce spending by businesses and families with the ultimate goal of lowering prices of goods and services.
“Further, most households reported an increase in prices of essential food items and over half of rural households reported being unable to access core staple food such as beans or maize.’’
Costly commodities have hit workers hard given that the average real wages, adjusted for inflation, stood at negative 3.83 percent last year compared to negative 0.59 percent in 2020.
Employers say the real wages will take longer to improve amid the recovery of the economy from Covid-19 economic hardships, which delivered layoffs, pay cuts and business closures.
