The Institute of Economic Affairs (IEA) on Tuesday held a public forum to highlight the economic effects of the Russian invasion of Ukraine to Kenya.
The Chief Executive Officer-IEA Mr. Kwame Owino said that the rise in commodity prices, monetary policy tightening and fiscal policy tightening are some of the effects that have resulted from the Russian invasion of Ukraine.
Owino added that effects of any global shock on Kenya is mediated by the structure of its economy and that in the present case, the products for which Kenya has dependency on in Eastern European countries affect agriculture and food directly.
“Agriculture has been majorly affected by rise in fertilizer cost which has led to increase in food prices and aggravated food insecurity within the country,” said Owino.
He revealed that fuel prices have increased thus raising transport costs for goods, urban commuters and the contingent effect of electricity prices leading to a fuel subsidy reform.
“There is a stabilization fund which has been operational since April 2020 that helps in overcoming the effects of erratic global fuel prices in Kenya,” added Owino
Speaking at the same forum, the IEA Program Director John Mutua said that Kenya is a small and open low income economy citing various attributes, conditions and outcomes of economic shocks in reference to Economist Pablo Guerron-Quintana.
“According to Pablo Guerron-Quintana, the essential and distinguishing attributes that assess the effects of a globally induced shock include highly volatile business cycles, large fluctuation in consumption and vulnerability to global shocks among others,” said Mutua.
Mutua stated that the Russian invasion of Ukraine has contributed to rise in commodity prices such as fertilizer and resultant inflationary pressure in Kenya.
“Russia is the world’s largest exporter of fertilizer in significant volumes imported by East African countries, including Kenya, as it accounts for 18 per cent of exports in potassium based fertilizer, 20 per cent of ammonium exports and 15 per cent of urea exports across the globe,” said Mutua.
By Ella Elizabeth and Irene Mwende
