Keep Us Strong WikiLeaks logo

Currently released so far... 97115 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
ETRD EAGR ETTC EAID ECON EFIN ECIN EINV ELAB EAIR ENRG EPET EWWT ECPS EIND EMIN ELTN EC ETMIN EUC EZ ET ELECTIONS ENVR EU EUN EG EINT ER ECONOMICS ES EMS ENIV EEB EN ECE ECOSOC EK ENVIRONMENT EFIS EI EWT ENGRD ECPSN EXIM EIAD ERIN ECPC EDEV ENGY ECTRD EPA ESTH ECCT EINVECON ENGR ERTD EUR EAP EWWC ELTD EL EXIMOPIC EXTERNAL ETRDEC ESCAP ECO EGAD ELNT ECONOMIC ENV ETRN EIAR EUMEM ENRGPARMOTRASENVKGHGPGOVECONTSPLEAID EREL ECOM ECONETRDEAGRJA ETCC ETRG ECONOMY EMED ETR ENERG EITC EFINOECD EURM EENG ERA EXPORT ENRD ECONEINVETRDEFINELABETRDKTDBPGOVOPIC EGEN EBRD EVIN ETRAD ECOWAS EFTA ECONETRDBESPAR EGOVSY EPIN EID ECONENRG EDRC ESENV ETT EB ENER ELTNSNAR ECHEVARRIA ETRC EPIT EDUC ESA EFI ENRGY ESCI EE EAIDXMXAXBXFFR EETC ECIP EIAID EIVN EBEXP ESTN EING EGOV ETRA EPETEIND ELAN ETRDGK EAIDRW ETRDEINVECINPGOVCS EPEC ENVI ELN EAG EPCS EPRT EPTED ETRB EUM EAIDS EFIC EFINECONEAIDUNGAGM EAIDAR ESF EIDN ELAM EDU EV EAIDAF ECN EDA EXBS EINTECPS ENRGTRGYETRDBEXPBTIOSZ EPREL EAC EINVEFIN ETA EAGER EINDIR ECA ECLAC ELAP EITI EUCOM ECONEFINETRDPGOVEAGRPTERKTFNKCRMEAID EARG ELDIN EINVKSCA ENNP EFINECONCS EFINTS ECCP ETC EAIRASECCASCID EINN ETRP EAIDNI EFQ ECOQKPKO EGPHUM EBUD ECONEINVEFINPGOVIZ ENERGY ELB EINDETRD EMI ECONEFIN EIB EURN ETRDEINVTINTCS EIN EFIM ETIO ELAINE EMN EATO EWTR EIPR EINVETC ETTD ETDR EIQ ECONCS EPPD ENRGIZ EISL ESPINOSA ELEC EAIG ESLCO EUREM ENTG ERD EINVECONSENVCSJA EEPET EUNCH ECINECONCS ETRO ETRDECONWTOCS ECUN EFND EPECO EAIRECONRP ERGR ETRDPGOV ECPN ENRGMO EPWR EET EAIS EAGRE EDUARDO EAGRRP EAIDPHUMPRELUG EICN ECONQH EVN EGHG ELBR EINF EAIDHO EENV ETEX ERNG ED
KMDR KPAO KPKO KJUS KCRM KGHG KFRD KWMN KDEM KTFN KHIV KGIC KIDE KSCA KNNP KHUM KIPR KSUM KISL KIRF KCOR KRCM KPAL KWBG KN KS KOMC KSEP KFLU KPWR KTIA KSEO KMPI KHLS KICC KSTH KMCA KVPR KPRM KE KU KZ KFLO KSAF KTIP KTEX KBCT KOCI KOLY KOR KAWC KACT KUNR KTDB KSTC KLIG KSKN KNN KCFE KCIP KGHA KHDP KPOW KUNC KDRL KV KPREL KCRS KPOL KRVC KRIM KGIT KWIR KT KIRC KOMO KRFD KUWAIT KG KFIN KSCI KTFIN KFTN KGOV KPRV KSAC KGIV KCRIM KPIR KSOC KBIO KW KGLB KMWN KPO KFSC KSEAO KSTCPL KSI KPRP KREC KFPC KUNH KCSA KMRS KNDP KR KICCPUR KPPAO KCSY KTBT KCIS KNEP KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG KNNB KGCC KINR KPOP KMFO KENV KNAR KVIR KDRG KDMR KFCE KNAO KDEN KGCN KICA KIMMITT KMCC KLFU KMSG KSEC KUM KCUL KMNP KSMT KCOM KOMCSG KSPR KPMI KRAD KIND KCRP KAUST KWAWC KTER KCHG KRDP KPAS KITA KTSC KPAOPREL KWGB KIRP KJUST KMIG KLAB KTFR KSEI KSTT KAPO KSTS KLSO KWNN KPOA KHSA KNPP KPAONZ KBTS KWWW KY KJRE KPAOKMDRKE KCRCM KSCS KWMNCI KESO KWUN KPLS KIIP KEDEM KPAOY KRIF KGICKS KREF KTRD KFRDSOCIRO KTAO KJU KWMNPHUMPRELKPAOZW KEN KO KNEI KEMR KKIV KEAI KWAC KRCIM KWCI KFIU KWIC KCORR KOMS KNNO KPAI KBWG KTTB KTBD KTIALG KILS KFEM KTDM KESS KNUC KPA KOMCCO KCEM KRCS KWBGSY KNPPIS KNNPMNUC KWN KERG KLTN KALM KCCP KSUMPHUM KREL KGH KLIP KTLA KAWK KWMM KVRP KVRC KAID KSLG KDEMK KX KIF KNPR KCFC KFTFN KTFM KPDD KCERS KMOC KDEMAF KMEPI KEMS KDRM KEPREL KBTR KEDU KNP KIRL KNNR KMPT KISLPINR KTPN KA KJUSTH KPIN KDEV KTDD KAKA KFRP KWNM KTSD KINL KJUSKUNR KWWMN KECF KWBC KPRO KVBL KOM KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG KEDM KFLD KLPM KRGY KNNF KICR KIFR KM KWMNCS KAWS KLAP KPAK KDDG KCGC KID KNSD KMPF KPFO KDP KCMR KRMS KNPT KNNNP KTIAPARM KDTB KNUP KPGOV KNAP KNNC KUK KSRE KREISLER KIVP KQ KTIAEUN KPALAOIS KRM KISLAO KWM KFLOA
PHUM PINR PTER PGOV PREL PREF PL PM PHSA PE PARM PINS PK PUNE PO PALESTINIAN PU PBTS PROP PTBS POL POLI PA PGOVZI POLMIL POLITICAL PARTIES POLM PD POLITICS POLICY PAS PMIL PINT PNAT PV PKO PPOL PERSONS PING PBIO PH PETR PARMS PRES PCON PETERS PRELBR PT PLAB PP PAK PDEM PKPA PSOCI PF PLO PTERM PJUS PSOE PELOSI PROPERTY PGOVPREL PARP PRL PNIR PHUMKPAL PG PREZ PGIC PBOV PAO PKK PROV PHSAK PHUMPREL PROTECTION PGOVBL PSI PRELPK PGOVENRG PUM PRELKPKO PATTY PSOC PRIVATIZATION PRELSP PGOVEAIDUKNOSWGMHUCANLLHFRSPITNZ PMIG PREC PAIGH PROG PSHA PARK PETER POG PHUS PPREL PS PTERPREL PRELPGOV POV PKPO PGOVECON POUS PGOVPRELPHUMPREFSMIGELABEAIDKCRMKWMN PWBG PMAR PREM PAR PNR PRELPGOVEAIDECONEINVBEXPSCULOIIPBTIO PARMIR PGOVGM PHUH PARTM PN PRE PTE PY POLUN PPEL PDOV PGOVSOCI PIRF PGOVPM PBST PRELEVU PGOR PBTSRU PRM PRELKPAOIZ PGVO PERL PGOC PAGR PMIN PHUMR PVIP PPD PGV PRAM PINL PKPAL PTERE PGOF PINO PHAS PODC PRHUM PHUMA PREO PPA PEPFAR PGO PRGOV PAC PRESL PORG PKFK PEPR PRELP PREFA PNG PGOVPHUMKPAO PRELECON PINOCHET PFOR PGOVLO PHUMBA PRELC PREK PHUME PHJM POLINT PGOVPZ PGOVKCRM PGOVE PHALANAGE PARTY PECON PEACE PROCESS PLN PRELSW PAHO PEDRO PRELA PASS PPAO PGPV PNUM PCUL PGGV PSA PGOVSMIGKCRMKWMNPHUMCVISKFRDCA PGIV PRFE POGOV PEL PBT PAMQ PINF PSEPC POSTS PHUMPGOV PVOV PHSAPREL PROLIFERATION PENA PRELTBIOBA PIN PRELL PGOVPTER PHAM PHYTRP PTEL PTERPGOV PHARM PROTESTS PRELAF PKBL PRELKPAO PKNP PARMP PHUML PFOV PERM PUOS PRELGOV PHUMPTER PARAGRAPH PERURENA PBTSEWWT PCI PETROL PINSO PINSCE PQL PEREZ PBS

Browse by classification

Community resources

courage is contagious

Viewing cable 06NAIROBI1808, Drought and Oil Prices Drive Kenya's Inflation

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

Understanding cables
Every cable message consists of three parts:
  • The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
  • The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
  • The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #06NAIROBI1808.
Reference ID Created Released Classification Origin
06NAIROBI1808 2006-04-26 14:08 2011-08-25 00:00 UNCLASSIFIED Embassy Nairobi
VZCZCXYZ0010
PP RUEHWEB

DE RUEHNR #1808/01 1161408
ZNR UUUUU ZZH
P 261408Z APR 06
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC PRIORITY 1283
INFO RUEHXR/RWANDA COLLECTIVE PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY 2787
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS NAIROBI 001808 
 
SIPDIS 
 
DEPT FOR AF/E, AF/RSA 
DEPT ALSO PASS TO USTR FOR BILL JACKSON 
TREASURY FOR LUKAS KOHLER 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN KE
SUBJECT: Drought and Oil Prices Drive Kenya's Inflation 
Rate Up 
 
REF: Nairobi 1614 
 
Summary: 
-------- 
1. Drought-induced food price increases and rising oil 
prices caused Kenya's overall inflation rate in March 2006 
to jump 19.4% compared to March 2005.  This will exacerbate 
poverty in Kenya, where over half the population is 
unemployed and living on less than $1/day.  However, 
underlying inflation, which excludes volatile food and 
energy, has been holding steady at about 5%.  The Central 
Bank of Kenya's (CBK) monetary policy appears to be 
effective at keeping interest rates stable, and the 
shilling has remained strong.  Even if the impending rainy 
season provides normal rainfall, energy and food prices 
will likely continue to rise and feed inflation, and may 
reduce 2006 GDP growth below the CBK's 5% forecast. End 
summary 
 
How the GOK Measures Inflation 
------------------------------ 
2. The CBK and the Central Bureau of Statistics (CBS) use 
several different statistics to measure inflation.  The CBS 
releases Consumer Price Indices (CPI) and inflation rates 
on a monthly basis. The CPI is based on data collected from 
selected retail outlets in 13 urban centers in the second 
and third week of the month, and is believed to represent 
the spending behavior of Kenyan urban households.  The 
Consumer Price Index is used to calculate two rates of 
inflation; overall and underlying.  The overall rate of 
inflation includes prices for the following categories of 
goods and services.  The CBK calculates overall inflation 
for Nairobi lower and middle/upper income groups and varies 
the weighting for each category of goods and services by 
income group.  CBK also calculates overall inflation for 
the other 12 urban centers in the survey. 
 
Food and drink 
Alcohol and tobacco 
Clothing and footwear 
Housing 
Fuel and power (energy) 
Household goods and services 
Medical goods and services 
Transportation and Communication 
Recreation and Education 
Personal Goods and services 
 
3. The underlying rate of inflation excludes the volatile 
categories of food, energy and transport/communication. 
The CBK targets the underlying rate in its monetary policy 
planning and implementation. 
 
4. The CBS and CBK use changes in the CPI to calculate 
several time-series measures of inflation.  The titles they 
use for these measures are misleading and inconsistent, and 
media reports are even more so.  Here are the translations. 
 
Month-on-Month or 12-month: Actually year-on-year (YOY) 
change in prices, since it compares the CPI in the current 
month with the CPI in same month in the previous year. 
Example: Feb 2006 month-on-month or 12-month inflation is 
the change from Feb 2005 CPI to the Feb 2006 CPI.  This 
report will refer to this measure as YOY change. 
 
Growth over one month: Change in CPI from the previous 
month.  Example: Feb 2006 growth over one month is the 
change in CPI from January 2006.  This report will refer to 
this measure as MOM change. 
 
Average Annual: Compares average CPI for the last 12 months 
with the average CPI of the preceding 12 months.  This 
measure serves as the seasonally-adjusted inflation rate, 
and is less volatile.  Example: Average annual inflation in 
Feb 2006 is the change from the average Feb 2005-Feb 2006 
CPI and the average Feb 2004-Feb 2005 CPI. This report will 
refer to this measure as average annual change. 
 
Drought Pushes Overall Inflation to New Heights 
--------------------------------------------- -- 
 
5. Drought-induced increases in the price of food and 
beverages pushed the March 2006 YOY overall inflation rate 
to 19.4%, the highest YOY rate since September 2004.  In 
the 12 months since March 2005, food and beverage prices 
have risen 29%, followed by energy at 12.6%, and alcohol 
 
and tobacco at 10.2%.  The overall inflation rate rose 1.7% 
MOM in March, a smaller jump than the February 4% MOM or 
January 8.7% increases.  The average annual rate of 
inflation, which is effectively seasonally adjusted, rose 
11.36% in March.  The average annual inflation rate has 
been rising since December 2005, after declining in the 
second half of 2005.  Outside of Nairobi, March YOY 
inflation was 14.5%, higher than the February increase of 
11.2%. 
 
6. Wages have not increased to match the inflation.  Over 
50% of Kenyans live on less than one dollar/day, and 
unemployment is over 50%, so this high inflation is pushing 
workers and consumers deeper into the hole, exacerbating 
poverty. 
 
Underlying Inflation Is Lower and Within CBK Target Range 
--------------------------------------------- ------------ 
 
7. Excluding increases in the volatile food, energy and 
transportation/communication categories creates a different 
picture.  The average annual underlying inflation rate has 
been declining since September 2005, and fell to 5.08% in 
March 2006.  This is within the CBK's target range for 
 
monetary policy. Stable interest rates and the continued 
strength of the shilling against the dollar indicate the 
CBK monetary policy remains effective, despite the drought 
and rising world oil prices. 
 
8. In its annual monetary policy statement released in 
March 2006, the CBK confirmed it would continue the policy 
set in October 2005, but make the necessary adjustments to 
compensate for the drought and financing of drought relief 
operations by the government.  CBK Governor Andrew Mullei 
said the CBK maintained its 5% inflation target, would work 
to ensure that the current high inflation does not 
translate into inflation expectations. The target growth of 
money - known as reserve money - will be at an average of 7 
per cent for 2006 to keep interest rates stable and low 
enough to support economic activity.  The CBK controls 
reserve money through sales and purchases of government 
securities to commercial banks under repurchase agreements 
(REPOs). 
 
9. Making the task of controlling inflation more difficult, 
electricity prices will rise 17% to 8.2/kwh shillings on 
June 1. The increase is a one-year surcharge for diesel- 
generated power needed to compensate for the drought- 
induced shortage of hydro-electric power.  Although the 
supplemental generators are supposed to avoid the need for 
power rationing, the increase in Kenya's already high power 
costs will further degrade Kenya's international 
competitiveness. 
 
Impact on GDP Forecasts 
----------------------- 
 
10. The CBK's latest forecast was that overall inflation 
increases would slow as the onset of the long rainy season 
relieves the drought in many places and leads to increased 
food production.  However, Kenya Shell managing director 
Patrick Obath said fuel prices were likely to increase this 
year due to surging international prices.  Nairobi Stock 
Exchange (NSE) Chief Executive Chris Mwebesa also warned 
the inflation rate was set to rise further as effects of 
the drought continue to bite.  Mwebesa predicted that GDP 
growth rate would be reduced to 4.5-5.5% in 2006, after 
growing at about 5.2% in 2005.  The CBK has reduced its 
2006 GDP growth estimate from 6% to 5.5% because of the 
drought. 
 
Comments 
-------- 
 
10. It is unfortunate that drought, rising food and energy 
prices will make managing Kenya's economy more difficult at 
a time when the GOK is struggling to deal with grand-scale 
corruption scandals and politicians are increasingly 
focused on the December 2007 general elections.  Although 
CBK Governor Mullei was recently suspended for allegedly 
steering relatively small consulting contracts to his son's 
firm, there is no indication yet of any change in the CBK's 
management of monetary policy. (Ref A, classified.) The 
long rains started on time, and have even caused flood 
damage in some parts of the country.  However, it is still 
too soon to determine whether the rains will refill the 
 
reservoirs behind the hydro-electric dams, will maintain 
food production, and reduce the need for the GOK to provide 
food assistance to the arid areas in the north and 
northeast. End comment. 
 
Table 1 
Overall Inflation, 2005-2006, based on Central Bureau of 
Statistics Consumer Price Index.  All numbers are 
percentages. 
 
          CPI      MOM change    YOY change      Average 
Annual 
2005     -----     ---------     ----------      ---------- 
---- 
Jan      174.4      1.28          14.87             12.1 
Feb      176.1      0.97          13.94             12.43 
Mar      178.6      1.42          14.15             12.91 
Apr      183.4      2.69          16.02             13.62 
May      184.5      0.60          14.78             14.48 
Jun      182.5     -1.08          11.91             14.97 
Jul      181.1     -0.75          11.77             15.21 
Aug      182.1      0.53           6.96             14.41 
Sept     179.4     -1.49           4.27             13.13 
Oct      179.8      0.25           3.72             11.89 
Nov      182.0      1.18           6.04             11.01 
Dec      185.2      1.77           7.56             10.31 
2006 
Jan      201.3      8.68          15.39             10.41 
Feb      209.3      4.01          18.87             10.88 
Mar      212.8      1.66          19.14             11.36 
 
 
Table 2 
Underlying Inflation, 2005-2006, based on Central Bureau of 
Statistics Consumer Price Index.  All numbers are 
percentages. 
 
        MOM change      YOY change        Average Annual 
2005    ----------      ----------        -------------- 
Jan      1.32             4.93                3.64 
Feb      0.32             5.21                3.86 
Mar      0.28             5.31                4.09 
Apr      0.48             5.9                 4.41 
May      0.47             6.42                4.78 
Jun      0.61             5.79                5.01 
Jul      0.24             5.95                5.22 
Aug      0.17             5.48                5.35 
Sept     0.23             5.39                5.43 
Oct      0.13             4.79                5.42 
Nov      0.12             4.69                5.39 
Dec      2.17             4.94                5.4 
2006 
Jan      1.66             4.0                 5.31 
Feb      1.05             3.94                5.2 
Mar       --              3.82                5.08 
 
BELLAMY