Kenya Treasury Says Lower Oil Prices to Contain Inflation

  • No evidence of demand pressures in economy, official says
  • Economy seen expanding 6% this year, led by construction

Lower oil prices will probably help to contain inflation in Kenya after it breached the top of the government’s target range in December, Treasury Principal Secretary Kamau Thugge said.

The country’s Monetary Policy Committee, which meets next week, is able to take measures to ensure price growth remains within the 2.5 percent to 7.5 percent target band, Thugge said by phone Thursday from the capital, Nairobi. Annual inflation accelerated to 8 percent last month, driven by the cost of alcoholic beverages and tobacco, according to the statistics agency.

“We don’t expect inflation to keep going up with lower oil prices,” Thugge said. “There is no evidence of demand pressures on core inflation.”

East Africa’s largest economy is investing in ports, roads and electricity generation to lower the cost of doing business and improve its economic prospects. The Treasury forecasts the economy will grow by 6 percent this year from an estimated 5.5 percent in 2015, driven by expansion in the construction sector and lower fuel prices, which will help boost manufacturing, according to Thugge.

The Treasury is in the process of concluding its budget, which will provide more details of the magnitude and source of borrowing for the next financial year. Thugge declined to confirm a report in the Financial Times on Thursday that the Kenyan Treasury is considering selling 15 and 20-year Eurobonds this year.

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