Beating Runaway Inflation in Kenya
beninmw | June 20, 2008 at 06:18 amby
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This month Kenya's Central Bureau of Statistics (CBS) released figures showing that Kenya's annual inflation has reached 31.5%.
There are many factors contributing to this trend amongst them are two that the entire globe faces at present-the rising petroleum costs and soaring cost of staple foods.
But when you add to these variables of both the approximate 20% to 23% growth in money due to the 2007 election campaign and the private property losses incurred in the aftermath of the elections then the rapid inflationary growth from February 2007 makes a lot of sense.
Here's Why Kenya's Inflation Was Foreseeable
When the Cheetah Index recently spoke with Dr. Mundia Kahiga to learn which of these variables contributes most significantly to Kenya's inflation challenges, he said," From economics we know that if you grow the amount of currency in a region or a country by 10%, but don't grow the region's production by 10%; then that region's inflation can be expected to grow to grow by 10%. This is because the 10% growth in money would cause a 10% increase in the demand for products." Without increasing production, the only way for businesses to meet demand would be to raise the prices by 10%.
So in essence, what you have in Kenya is a situation where not only did the supply of local cash go up drastically, but production actually went down due in large part to the destruction of crops and other private property.
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