Household budgets are set to continue rising for the rest of the year as key inflation indicators continue rising.
The cost of food, transport and fuel is on an upward trend largely on account of tax adjustments, weakening shilling and external factors.
After the enforcement of the VAT law led to price of some basic commodities going up by over 20 per cent, there is no reprieve in sight for consumers as fuel costs have followed suit.
In new price monthly guidelines by Energy Regulatory Commission over the weekend, fuel prices were raised by between Sh1.11 and Sh1.62 a litre in Nairobi.
ERC attributed the upward adjustment to a 4.54 per cent jump in international crude oil to Sh9,774 ($111.70) a barrel and a 0.56 per cent (49 cents) month on month depreciation of the shilling against the US dollar to 87.45 in August.
The monthly rise in crude oil is close to February's levels when it touched Sh9,804 ($112.05). The shilling, on the other hand, has been weakening at stable margins since April's Sh84.30 against the greenback. At present level, it's above the February's 87.31 exchange rate.
Another factor that has led to a jump in fuel prices is the 1.5 per cent railway development levy on imports targeting to raise Sh22 billion. The levy has since July exposed oil imports to tax that would translate to Sh146.61 per barrel of crude oil.
The cost for diesel is up Sh1.11 this month to Sh105.55 a litre. The ripple-effect of this is set to be felt through the economy as the commodity is used in industrial production, farming and transport. A litre of super petrol is up Sh1.62 to Sh Sh113.88.
Rural and urban poor households will also have to adjust their fuel budgets as a litre of kerosine which is the main source of lighting and cooking is now retailing at Sh85.55.
The prices have modestly changed from their January levels when super, diesel and kerosine went for Sh111.60, Sh103.99 and Sh83.86 a litre, respectively.
The Consumer Federation of Kenya has predicted inflation to go beyond 10 per cent by end of the year.
“From our informed assessment, we project that inflation will rise to double digit by end of the month,” Cofek said in a statement following the enforcement of VAT Act 2013 on September 2.
The Central Bank's Monetary Committee said in its September 3 meeting that the VAT measures would “contribute to short-term increases in inflation.”
Cabinet secretary Henry Rotich however predicted on Friday the cost of living to significantly ease in medium term period around 2018.
This is when when fruits of increased investment in transport, energy, food, health and education sectors are expected to be ripe.
He backed the Sh35.2 billion National Social Protection Net kitty, that include Sh21.8 billion loan from the World bank, to cushion poor households.