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Category: Community News

Written by Kim

NAIROBI, Kenya (AP) - Kenya's currency is in a free fall against the dollar, dropping 30 percent this year to an all-time low on Tuesday. That has increased prices of food and fuel across the country and has pushed more Kenyans closer to poverty.

Flour, sugar, the cost of a bus ticket - they're all rising rapidly in what is supposed to be East Africa's premier economy, squeezing millions of low-wage workers barely getting by in Nairobi's sprawling slums.

The Kenyan shilling is the worst-performing currency in the world this year, according to data compiled by Bloomberg. On Tuesday the currency touched an all-time low of 104 shillings to the dollar. At the beginning of the year it was about 80 shillings to the dollar.

In Nairobi's streets, the blame falls squarely on the government.

"The prices are unbelievable. It's so high," said Moses Mungai, a flower seller on a busy street corner. "It's the politics of selfishness. When we elect these people they are only thinking about themselves, nothing else. Corruption has increased the cost of living."

Echoing a common allegation here, Mungai believes only a fraction of government revenues meant for infrastructure projects actually get spent on roads and bridges, leaving millions of shillings for corrupt officials - and low-quality roads for Kenyans.

Aly Khan Satchu, the chief executive of the financial services firm Rich Management, also blames the government for the free-fall. He believes the central bank should have raised interest rates to stem the decline.

Kenyan exports - tourism, tea, coffee and flowers - will do well with the shilling's decline, Khan said, but Kenyan consumers are in for rough times.

"The average Kenyan is a massive loser because he is paying more for food and fuel as the cost of living has gone up, and it is unlikely that he will be going to get a pay raise to match it," he said.

The shilling has dropped almost 6 percent in the last four days. The rate of inflation this year is about 16 percent.

One sector in Kenya - the aid community - could see a temporary boost from the currency's fall. Donations - most recently for East Africa's drought and famine - arrive in dollars or euros, and they now buy more shillings. But Emma Naylor-Ngugi, the regional director for the aid group CARE, said her organization is more worried about the negative impacts for residents.

Rent, transportation and school fees all cost more for Kenyans now, she said.

"Some basic foodstuffs such as maize meal are now scarcely affordable by ordinary families," Naylor-Ngugi said. "In this situation of extreme food insecurity, the rising price of food is driving even more people into poverty. Current food prices are such that even working families living above the official poverty line are now struggling to eat adequately."

Economist James Shikwati, who heads the Kenyan economic think tank the Inter Region Economic Network, said government price controls on staple foods have caused big problems. He said Kenya does not have clear government leadership like a parliamentary oversight committee to ask the Central Bank "what the heck is going on with the shilling."

For staple foods like maize or sugar, the government "is guaranteeing high prices but also allowing duty-free imports. Those two points do not add up to food security. Then the incentive to import will be higher than the incentive to labor on your farm," he said.

Consumer confidence had been eroded despite rosy figures for Kenyan economic growth produced by the World Bank, he said.

"Consumers don't believe these growth figures," he said. "When you are not able to afford food, you are not seeing the benefits of growth. It should make your life more comfortable, not harder."

As Mungai bundled mini orange roses into bouquets Tuesday, would-be customers walked right by. Though many of his customers are European and American ex-pats, a third of his customers are - or used to be - Kenyans - but they no longer buy roses.

"My flower business is completely down," Mungai said. "Flowers are a luxury, so when life is expensive you put aside the luxuries."

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Associated Press writers Malkhadir M. Muhumed and Katharine Houreld in Nairobi contributed to this report.