According to the Kenya Institute for Public Policy Research and Analysis (Kippra)'s Kenya Economic Report 2023, titled 'Cost of Living and the Role of Markets,' the consumer price index (CPI) reached 7.7%, the highest level since 2018.
"Headline inflation, which measures the overall change in the consumer price index (CPI), reached its highest level in five years in 2022, primarily due to high food prices and potential pass-through from fuel prices,'' the report reads in part.
Inflation reached 9.6% in October 2022, up from 6.5% in October 2021, but fell somewhat to a rate of 9.5% in November 2022, down from 5.8% in November 2021, and further to 9.1% in December 2022, down from 5.7% in the same month in 2021.
Supply-side issues and, to a lesser extent, fundamental demand pressures drove the sustained inflationary pressures. "Insufficient precipitation experienced during the short rains in 2021 and the long rains in 2022 adversely affected food production, leading to a sharp rise in domestic food prices,'' the report adds.
The minimum wage in Kenya is still insufficient to allow an employee to live a respectable life because it only accounts for around half of the living wage. Because of this, it might be difficult for workers to pay for the fundamental necessities they need to survive.
The cost of food, housing, and utilities were the main determinants of the high cost of living for households out of the fundamental elements that make up the minimum wage basket.
Households from lower income categories in Nairobi are particularly impacted by the high cost of living caused by the drought, which also has an impact on the food supply, according to an analysis of inflation by income groups.
Additionally, the research shows the significance of the informal sector, particularly small and medium-sized businesses, in the economy's ability to create jobs and the necessity of continuing to institutionalize policies that support the formalization of employment.
Throughout the analysis period, structural changes in employment in the unorganized sector by activity remained marginal.