IMF Cites Cost Pressures, Projects Kenya's Inflation At 7.2 Percent In 2022

 

By Kepha Muiruri For Citizen Digital

The International Monetary Fund (IMF) expects the cost of living in Kenya to soar throughout the year with inflation averaging 7.2 per cent across 2022.

The projection is contained in the IMF April World Economic Outlook (WEO) report published on Tuesday.

Further, the multilateral lender expects the cost pain to remain over the medium term with inflation projected at 7.1 per cent in 2023.

At the same time, the IMF has left Kenya’s GDP projection at 5.7 per cent and at a lower 4.6 per cent in 2023.

The projected growth is nevertheless lower than the institution's estimate of a 7.2 per cent GDP expansion last year.

Globally, the IMF expects growth to slow down to 3.6 per cent in 2022 from an estimated 6.1 per cent last year as the Russia-Ukraine war slows down economic recovery after COVID-19 shocks.

For the Sub-Saharan region, the impact of the Russia-Ukraine war is expected to be manifested in higher food prices.

“Higher food prices will hurt consumers’ purchasing power-particularly among low-income households- and weigh on domestic demand,” noted the IMF.

The projected high cost of living in Kenya would be the highest since the rebasing of the consumer price index in February 2020 when inflation averaged seven per cent.

Presently, inflation in Kenya stands at 5.6 per cent as of March 2021 but is set to spike at the end of April on costlier fuel and certain food commodities such as wheat, maize flour and milk.

The current cost of living is the highest since December 2021 when inflation stood at 5.7 per cent.

Last week, the World Bank lauded alternative measures to check inflation in the country such as fuel subsidies even as it warned of fiscal pressures should the high crude prices in the international market persist.

The higher fuel prices are expected to widen the gap in Kenya’s trade balance, underlining costlier imports, with the IMF projecting the current account deficit at 5.8 per cent of GDP by the close of the year from 5.4 per cent in 2021.

The higher inflation view however holds within the Central Bank of Kenya (CBK) target band of between 2.5 and 7.5 per cent.