Kenya Inflation Surges in April as Impact of Drought Worsens

(Bloomberg) -- Kenya’s annual inflation accelerated for a fourth consecutive month to its highest level in five years as price pressures from an ongoing drought persist.

Consumer prices surged 11.5 percent in April from 10.3 percent in March, the Kenya National Bureau of Statistics said in a statement emailed from the capital, Nairobi. The inflation rate breached the Central Bank of Kenya’s 7.5 percent ceiling in February.

The food and non-alcoholic drinks index, which accounts for a third of the inflation basket, increased 21 percent in April from a year ago, the KNBS said.

Kenya, the world’s largest exporter of black tea, is in the throes of a severe drought that’s curtailed food production and could shave 0.6 percent off national economic output, according to the World Bank. East Africa’s largest economy’s rain-fed farming sector contributes a third of gross domestic product. The meteorological department has warned that seasonal rains between March and May will be less than normal.

Drought is still “the biggest risk to the inflation outlook” and an outbreak of armyworm pests that have attacked the staple corn crop may prolong food inflationary pressure, said Jibran Qureishi, economist for East Africa at Stanbic Holdings Ltd.

“Prices could stay higher for longer,” Qureishi said by phone from Nairobi. “At the moment nobody knows how severe the impact of the armyworm outbreak is going to be on corn production.”

Other price pressures are benign, leaving “little justification for tightening,” according to Razia Khan, the chief Africa economist at Standard Chartered Plc in London.

“For all the alarm that the headline number will generate, this is not yet anything like a generalized inflation experience,” Khan said in an emailed response to questions.