Consumer pain as import bill hits Sh194bn in January

Kenya’s import bill hit Sh194 billion in January – a record for a month – showing the economic impact of rising commodity prices in a world still recovering from the shocks of the Covid-19 pandemic.

Data by the Kenya National Bureau of Statistics (KNBS) released yesterday show the country’s import bill for January grew by 21 per cent from Sh160.7 billion a year ago – mainly propelled by sharp rises in the value of petroleum products and industrial supplies used in the manufacture of consumer items.

The value of imported petroleum products rose by 41.8 per cent to Sh34.89 billion.

It coincided with a window when tight oil supplies pushed prices to a seven year-high as major producers in OPEC, Russia and allies – collectively known as OPEC+ – struggled to raise their levels.

Petroleum prices have remained high due to the Russian-Ukraine conflict, forcing the government to retain subsidies in a bid to stem public anger.

To ease pressure on consumers, lawmakers this week allocated Sh6.7 billion to the fuel subsidy plan. 

MPs say the allocation will cushion consumers from the shocks of rising petrol prices.

The money will be channelled to the Petroleum Development Levy Fund.

Weakened shilling

“Increase Sh6.7 billion (recurrent) for fuel stabilisation,” the National Assembly Budget Committee said in its recommendation to the House.

The Energy and Petroleum Regulatory Authority mid this month increased petrol and diesel prices by Sh5 a litre, taking the cost to a historic high.

The authority said it took the decision following a rapid rally in international brent crude oil prices.

The rise came after the state partially lifted the subsidy that had been keeping fuel prices stable and pushed the cost of petrol and diesel to Sh134.72 and Sh115.6 per litre respectively.

According to the KNBS data, industrial imports grew sharpest in terms of absolute value in January, hitting Sh85.37 billion, from Sh65.15 billion in a similar period last year.

This does not bode well for consumers because raw material costs are passed to them through the shelf prices of finished products.

Kenya’s giant import bill is partly attributed to a weakened shilling.

This has led to expensive imports and increased consumption.

Higher food prices

With Kenya being a net importer of machinery, oil and many other secondary products, a depreciation in the currency leads to an increase in prices of goods sourced from abroad.

The shilling has been under pressure against the American dollar, setting up the country for more expensive imports and debt servicing distress.

The Central Bank of Kenya quoted the shilling at 114.6 to a dollar on Thursday.

The import bill is tipped to rise further amid higher food and energy prices – a fallout of the war in Europe along with supply shortages – according to financial and economic experts. 

The analysts say this will be the immediate inflictor of pain for low and middle-income economies like Kenya.

“Some developing economies are heavily reliant on Russia and Ukraine for food. These two nations supply more than 75 per cent of the wheat imported by a handful of economies in Europe and Central Asia, the Middle East and Africa,” said Indermit Gill – the Vice President for Equitable Growth, Finance, and Institutions at the World Bank.

“These economies are particularly vulnerable to a disruption in the production or transport of grains and seeds from Russia and Ukraine.” 

International oil prices are likely to remain elevated, while supply side bottlenecks and rising freight costs could hurt exports, analysts add.

Kenya imports petroleum, machinery, vehicles, medicine and pharmaceutical products, vegetable oil, wheat, clothing, shoes and many other items.

[email protected]