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MOYALE, Kenya (Reuters) - At a forgotten edge of Kenya's economy, remoteness has been no protection from the global pain of rising prices for the mountain town of Moyale.
It perches at the Ethiopian border, far north of the capital Nairobi across mountains that descend to a forbidding desert of black volcanic stones, sand and armed bandits before rising again into the frontier town's green scrub hills.
Few trucks reach Moyale, at the end of a tire-chewing 500 km (310 mile) rock road, and the produce it sends to the outside world is limited mostly to livestock.
But its distance and the lack of a good road has only magnified the impact of world fuel and food price rises on the cost of goods brought from outside.
"Inflation is affecting them tremendously. We rely heavily on products from Nairobi and the major reason (for inflation) is because of transport, because of the road," Moyale Central District Officer William Chirchir told Reuters.
"If it goes for 10 shillings in Nairobi, you'll get it for 50 shillings here," Chirchir said.
Because the prices of basics such as food and fuel make up such a large proportion of household budgets in Africa, people in the world's poorest continent feel soaring commodity prices more than most.
Although less immediately visible than in Africa's cities, the impact can be even harsher in remote corners such as northern Kenya.
Residents of the vast northern half of the country have long felt neglected by the more prosperous south and speak bitterly of "Kenya Mbili" -- Swahili for two Kenyas.
If the two parts of the country now have one thing in common, it is the impact of inflation.
"Business is terrible. It is all down to that inflation effect," trader Gumacha Gisiko said at Moyale's market.
Kenya's annual inflation hit 31.5 percent in May -- a high unseen since the early 1990s -- before cooling to 29.3 in June.
The few vehicles on the road at Moyale are the heavy trucks carrying livestock to market and people who brave the grueling, dusty drive sitting in the open air above the other live cargo bound for Nairobi.
Trading in the north seems at a standstill. Most merchants have only the same few things -- firewood and milk -- for sale. The higher fuel costs also mean it is more expensive to send goods to the markets further south.
The African Development Bank's African development fund believes the route through Moyale could carry $175 million a year in trade between Kenya and landlocked Ethiopia if it is upgraded. For now, it is only $35 million annually.
Since most residents of the north are nomadic herders of cattle, goats, sheep and camels, there is very little farming of staples.
People in the north routinely rely on food aid and increasingly so in recent months.
A sack of potatoes from Meru, more than 550 km (340 miles) away by road, has nearly tripled to 3,050 shillings ($46.20) from 1,300 four months ago.
The higher fuel costs have also pushed up the cost of water in towns such as Moyale and Marsabit, its nearest big neighbor located 250 km (155 miles) south on the road.
Although the towns share oasis-like positions in green hills above the desert, their lack of water collection and storage means constant supply problems and forces residents to truck water to where it is needed.
Two years of poor rains now means a crisis.
"Water seems like it costs as much as petrol now. It is expensive, but what can you do?" asked Mamo Sharamo, an unemployed resident of Marsabit.
In Marsabit town, dozens lined up late into the evening with 20-litre plastic jerry cans to buy water trucked in from a borehole 60 km away.
The cost to fill is 70 shillings ($1.04), up from 40 last year as the drought began to bite, Sharamo said.
The drought and hardship also increase the potential for inter-tribal clashes, although northern Kenya's isolation helped to insulate it from post-election chaos in Kenya earlier this year. The region was calm during the crisis.
Moyale's distance from Nairobi and proximity to Ethiopia also give it a benefit when it comes to fuel costs in that subsidized fuel smuggled across the border sells at a slight discount to the usual Kenyan prices.
Ethiopian diesel costs 54 shillings a liter compared to about 99 in most of Kenya. However, no diesel is trucked into Moyale from the Kenyan side, so smugglers are able to hike the price to close to what the rest of Kenya is paying.
Two government officials, speaking on condition of anonymity, said they were aware of the smuggling but were in a bit of a bind to stop it: they too rely on the smuggled diesel.
(Editing by Matthew Tostevin)
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