Kenya, like many countries around the world, has been battling inflation, especially in the wake of the COVID-19 pandemic. Rising prices for food, fuel, and everyday essentials have hit Kenyan households hard. The economic disruption caused by the pandemic, combined with global factors such as the war in Ukraine, has made inflation one of the biggest challenges for Kenya’s government. So, what’s being done about it, and what strategies is Kenya employing to manage inflation and rebuild its economy?

The Impact of Inflation on Everyday Kenyans
First things first—inflation simply means that prices for goods and services are going up, and that’s not good news for the average Kenyan. For many families, this means higher grocery bills, more expensive transport, and overall, less money to go around. According to the World Bank, inflation in Kenya spiked as the country emerged from the pandemic. Prices for basic items like food and fuel skyrocketed, which squeezed household budgets and slowed down economic growth.
The pandemic worsened these inflationary pressures because it caused disruptions in global supply chains. The price of importing goods went up, and the cost was passed on to consumers. Additionally, as Kenya relies on imported fuel, rising oil prices have significantly impacted transport costs. With higher fuel prices, everything from bus fares to food delivery costs increased.

Causes of Inflation in Kenya
Inflation in Kenya is not just a result of domestic issues; it’s heavily influenced by global factors. The war in Ukraine, for example, caused disruptions in global grain supplies, affecting the cost of wheat and other staple foods in Kenya. As noted by the World Economic Forum, these types of disruptions hit developing countries like Kenya especially hard, where a large portion of the population relies on affordable food.
On the domestic side, drought has worsened the food situation. With less rainfall, crop yields have dropped, pushing up food prices further. Meanwhile, the pandemic led to job losses, reducing people’s ability to spend. All of these factors together create a vicious cycle where prices keep rising, but incomes don’t keep up.

Kenya’s Strategy: Interest Rates and Monetary Policy
So, what is Kenya doing to tackle this? One of the primary tools a government has to control inflation is monetary policy—specifically, adjusting interest rates. By raising interest rates, the Central Bank of Kenya (CBK) is trying to slow down inflation. When interest rates go up, borrowing becomes more expensive, which means businesses and individuals are less likely to take loans for spending. This reduced demand for goods and services can help cool down price increases.
In 2022, the CBK raised its interest rates in an effort to bring inflation under control. While this strategy can help reduce inflation, it also comes with downsides. Higher interest rates make it harder for businesses to expand or invest, which could slow down economic growth in the short term.

Fiscal Policy: Government Spending and Taxation
Alongside monetary policy, the government has also been focusing on fiscal measures. This includes how much the government spends and how it manages taxes. During the pandemic, Kenya, like many countries, increased spending to help people and businesses survive through tough times. However, as the BTI Project highlights, this created a budget deficit that needs to be managed.
To combat inflation, the government is now working on reducing the deficit by cutting back on some spending. Additionally, they are focusing on tax reforms to boost government revenue. This way, the government can continue to invest in critical sectors like infrastructure and education without borrowing too much, which would only add to the inflation problem.

Boosting Local Production to Reduce Imports
One long-term strategy Kenya is focusing on is boosting local production to reduce its reliance on imports. As the International Journal of Economics, Commerce, and Management points out, Kenya’s heavy dependence on imports makes it vulnerable to global price changes. By investing in local industries like agriculture, manufacturing, and renewable energy, the government hopes to create a more self-sufficient economy.
This strategy has a dual benefit. First, it helps keep money within the country, reducing the trade deficit. Second, by producing more goods locally, Kenya can shield itself from price hikes caused by global supply chain issues, making the economy more resilient.

Supporting Households and Businesses
While tackling inflation is essential, Kenya’s government is also mindful of the need to support its citizens through these tough times. To cushion the blow, the government has rolled out subsidies for essential goods like fuel and maize. These subsidies are meant to help keep prices stable and prevent further inflationary pressure.
However, these subsidies come at a cost. The government can’t keep them going indefinitely without creating more debt. According to One Campaign, the goal is to strike a balance between providing immediate relief and not worsening the economic situation with unsustainable subsidies.

Encouraging Private Investment
Another strategy to stabilize the economy post-pandemic is to encourage private investment. Kenya is actively trying to attract both local and foreign investors, particularly in sectors that can drive economic growth and create jobs. As RePEc points out, sectors like tech and renewable energy are key to Kenya’s economic future.
The government is also working to improve the business environment by reducing red tape and making it easier for businesses to operate. These efforts are crucial because a thriving private sector can help the economy recover faster and create more jobs, which in turn would help reduce inflation.

Looking Forward: Challenges Ahead
Despite the efforts to control inflation, there are still significant challenges. Kenya’s debt levels are high, and managing these debts while addressing inflation is a balancing act. Moreover, external shocks—like the war in Ukraine or fluctuating global oil prices—remain beyond Kenya’s control.
In the long term, Kenya needs to continue investing in infrastructure, education, and healthcare to ensure that the economy can grow in a sustainable way. Reducing dependence on imports, boosting local industries, and maintaining a stable macroeconomic environment are all key strategies moving forward.

Navigating Inflation in a Post-Pandemic World
Kenya’s battle against inflation is a tough one, and it’s far from over. However, with a combination of monetary policy, fiscal adjustments, and efforts to boost local production, the government is taking steps to tackle the problem head-on. While inflation is still a significant challenge, Kenya’s long-term strategies could help create a more resilient and stable economy in the years to come.