Rédaction Africa Links 24 with Daily Nation
Published on 2024-02-01 06:20:28
Middle-class households in Kenya have been hit hard by a sharp increase in their average monthly electricity consumption budgets.
Since the government retired a subsidy and the value of the shilling plummeted, the average cost of 200 kilowatt-hours (units) of electricity has climbed by Sh3,073.88.
This has caused significant strain on household finances, making it one of the most painful cost increases in recent years.
According to Kenya National Bureau of Statistics (KNBS) data, consumers paid an average of Sh7,447 for 200 kWh in January, representing a 41.08% surge over the previous year and an alarming 70.29% increase since the subsidy was in place.
The impact of this increased cost is even more pronounced for low-income households using a maximum of 50 units of electricity, with the average cost nearly doubling to Sh1,579 from Sh796.83 in January 2022.
The removal of a 15% cushion on power bills by the current administration in December 2022 has only exacerbated the situation, with reviewed rates of 30 to 100 units increasing by 18.69% to Sh26.10 per unit from April 2023.
In addition to the removal of the subsidy, variable surcharges such as the fuel cost charge (FCC) and foreign exchange rate fluctuation adjustment (Ferfa) have also contributed to the rise in electricity costs.
FCC is paid to power producers using diesel to generate electricity, while Ferfa helps Kenya Power offset foreign loans and power purchase costs in line with the shilling-dollar exchange rate.
These increases in electricity costs, along with higher education expenses and rising food prices, have been identified as the biggest drivers of consumer prices in Kenya. Inflation has risen to 6.9% from 6.6% in the previous year, with the cost of education and food contributing significantly to the increase.
This inflationary pressure is likely to prompt the Central Bank of Kenya to keep base interest rates steady at 12.5% to mitigate the impact on borrowing costs.
Despite these challenges, there is some hope on the horizon. Analysts forecast inflation to average 6.5% in 2024, slower than the 7.7% average for the previous year.
Factors such as the emergence of the El Niño weather system, which typically leads to wetter weather and higher farm production in East Africa, are expected to ease the pressure on food prices.
Additionally, a slower pace of shilling depreciation and smaller tax increases are expected to contribute to a more stable inflation outlook in the coming year.
While the rise in electricity costs has placed a heavy burden on middle-class households, there are indications that the overall inflationary pressures may be alleviated in the near future.
However, in the short term, families will continue to grapple with the financial strain caused by these significant cost increases.
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