Inflation in Kenya

A short history of inflation in Kenya

The Horn of Africa Drought (2011 to 2012)

Kenyan inflation peaked at 19.7% in the year to November 2011. Drought across the Horn of Africa cut the harvest and drove up food prices in an economy where food is a large share of household spending, while the shilling lost roughly a quarter of its value against the dollar over the year, raising the cost of imported fuel at the same moment.

The Central Bank of Kenya had been slow to react and then moved sharply, raising its policy rate from single figures to 18% within a few months, which stabilised the currency and brought inflation down through 2012. The combination of a food-heavy basket and an economy importing its fuel means Kenyan inflation still tends to move with rainfall and the exchange rate more than with domestic demand.

Post-Covid Inflation (2021 to 2023)

In Kenya, prices rose fastest in October 2022, at 9.6%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.