HOW TO CURB INFLATION IN KENYA
Written by Obwoge Joseph on September 20, 2023
By John Mauya
Kenya’s inflation rate increased to 6.7 percent in August 2023 due to the indicator measure price variations in goods and services compared to the same month one year earlier.
In April 2022, inflation in Kenya stood at 6.5 percent, the current country’s Consumer Price Index (CPI) increased by roughly 0.8 percent compared to the previous month, mainly due to higher prices in food and transport.
Measures to consider in combating inflation in Kenya:
1. Monetary Policy
The Central Bank of Kenya can implement a tighter monetary policy by increasing interest rates. This helps reduce inflationary pressures by making borrowing more expensive, thus discouraging excessive spending.
2. Fiscal Policy
The government can pursue prudent fiscal policies to reduce budget deficits and curb excessive borrowing.
This can be achieved through measures such as reducing unnecessary expenditures, rationalizing subsidies, and increasing tax collection.
3. Supply-Side Policies
The government should focus on improving productivity and efficiency in various sectors of the economy. This can be achieved through targeted investments in infrastructure, education, and technology.
By increasing the overall supply of goods and services, inflationary pressures can be mitigated.
4. Price Controls and Monitoring
The government can enforce price controls on essential goods and services to prevent opportunistic price increases. Additionally, regular monitoring and reporting of price levels can help identify and address instances of price gouging or unfair pricing practices.
5. Promote Competition
Encourage competition in the market by removing barriers to entry for new businesses and ensuring that monopolistic practices are discouraged.
Increased competition helps keep prices in check and prevents excessive price hikes.
6. Enhance Agricultural Productivity
Boosting agricultural productivity is crucial, as food prices often have a significant impact on inflation.
The government can invest in irrigation projects, provide subsidies for fertilizers and modern agricultural tools, and support farmers through training and access to credit.
7. Strengthen Exchange Rate Stability
The Central Bank can take measures to stabilize the exchange rate. A stable exchange rate helps control import costs and prevent imported inflation.
8. Promote Savings and Investment
Encourage individuals and businesses to save and invest by providing incentives such as tax breaks for long-term savings and investment plans.
Increased savings and investment can help stimulate economic growth without adding to inflationary pressures.
Additionally, these strategies should be supported by broader efforts to alleviate poverty, provide social safety nets, and promote inclusive economic growth.
It’s important to note that these measures need to be implemented in combination, and constant monitoring and evaluation are crucial to ensure their effectiveness.
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