Experts worried after Uganda, and Tanzania overtake Kenya in the latest inflation ranking by IMF and World Economic Outlook.
According to the inflation rating provided by the International Monetary Fund (IMF) World Economic Outlook (2023), Kenya’s economic standing suffered in comparison to its close East African Community (EAC) neighbors, Tanzania and Uganda.
Kenya was rated 100th globally and has an inflation rate of 7.38 percent according to the survey.
Tanzania, on the other hand, had the lowest inflation in the EAC, at 3.96 percent, and was placed 161 internationally, while Uganda had the highest inflation, at 6.44 percent, and was ranked 19 places ahead of Kenya.
Kenya’s debt to Gross Domestic Product (GDP) ratio, which was 68.4%, placed it in position 64 globally in addition to having a high inflation rate.
According to Wisevoter, an international research firm, high inflation was worrisome to countries seeking economic prosperity.
“Since inflation is a persistent increase in the overall price level of goods and services in an economy over time, it is the most watched economic indicator as it affects the purchasing power of a currency,” the international firm explained.
The firm further revealed that a high inflation rate harms economic growth by reducing consumer purchasing power, causing uncertainty, and leading to higher interest rates.
Speaking to local media, renowned economist Vincent Kimosop noted that the data from IMF showed that Tanzania and Uganda had a lower cost of living compared to Kenya.
Kimosop, however, warned that the inflation rate alone should not be used to ascertain that Tanzania and Uganda’s economies were better than Kenya’s.
“Inflation rate is generally measured by taking a basket of goods and checking its prices and getting their average.
“To get a full picture of the economic state of a country, you look at all macro prices which are; interest rates, exchange rates, and inflation,” he explained.
On the exchange rate, Ugandan shilling continued to gain strength against Kenya’s.
In June 2022, the exchange rate for Ksh1 was Ush32 and in 2023, Ush had gained strength and was at Ush26 for Ksh1.
Similarly, Tanzanian currency was quickly gaining strength on Ksh with Ksh1 exchanging at Tsh21 in May 2021 and Tsh17 in June 2023.
Kimosop, therefore, observed that examining what was causing pressure on the Kenyan Shilling was prudent, including speculative factors.
The economist also noted that the 2022/2023 drought, the worst in 40 years, could have given Uganda an advantage as both economies are largely agriculture driven.
“Uganda is a food surplus country. In terms of the cost of living, it is relatively cheaper in those (Tanzania and Uganda) countries,” he stated.