The impact of the high cost of sugar on inflation

The question on the breakfast table in most Kenyan households revolves around the sugar price. People are concerned about whether it will drop from a record high of Ksh 200 per kg or will it continue to rise in June, pushing up the inflation rate– which tracks commodity and services prices – over a year. The inflation rate in May 2023 stood at 8 percent, rising from 7.9 percent in April.

Local and global sugar shortages in 2023 contributed to a rise in average annual inflation from 7.6% in December 2022 to 8.03% in May 2023. India and Pakistan, the biggest sugar producers responsible for 25 percent of the global sugar production, are experiencing shortages and export restrictions. India, the top sugar-producing nation, has been diverting to ethanol rather than sugar production, worsening the sugar shortage crisis. It is targeting to have a 20 percent ethanol -gasoline blend for its vehicles use, thus reducing the reliance on petrol.

In Kenya, the sugar shortage crisis comes five years after the maize crisis drove inflation to record highs of 11 per cent.