Africa-Press – Uganda. The revelation by the Uganda Bureau of Statistics (Ubos) yesterday that annual headline inflation for the 12 months to May 2022 soared to 6.3 percent from 4.9 percent in April 2022 should be a cue to batten down the hatches. The central bank had previously taken great comfort in the fact that inflation had not breached the five percent mark.
In fact, Bank of Uganda has on a lighter—if no less economically devastating—note told all and sundry that the problem of inflation is tied up with geopolitics. The central bank has—much like the Finance ministry—stopped short of assailing the idea of the government of Uganda intervening to correct the course.
Generally, while politicians and policymakers have disagreed over the solution to inflation, the urgency of finding one remains widely accepted.
During a recent policy workshop on high commodity prices, Finance minister Matia Kasaija was hardly useful in soothing fears. At any rate, he said, subsidies are “neither efficient at targeting the intended beneficiaries nor sustainable.”
The latest hard information from Ubos, however, shows that inflation rates and consumer price index (CPI) weights of goods and services in Uganda’s CPI basket are troublingly high. Diesel—dominant in agriculture, mining and construction industries—ballooned by an eye-watering 54 percent at the pump. Elsewhere, maize grain—used to address the nutrient needs of schoolgoers—swelled by 11 percent.
Speaking at the back end of last month, Mr Kasaija said perceived inaction should not be interpreted as the GoU wishing away problems. He was quick to draw parallels with when inflation peaked at 24.4 percent in November of 2011.
“Some leaders incited the public to engage in walk-to-work protests. The government resisted the pressure to implement distortionary policies and instead concentrated on implementing appropriate prudent fiscal and monetary policies,” he said, adding,
“In a few months the overall inflation had dropped to below five percent per year, our target inflation rate.”
The Finance minister says a carbon copy of such prudence is already yielding dividends this side of the year. Imported clinker has, he said, seen the price of cement dip in months gone by. The ongoing drop in ocean freight charges will eventually address the deepening sense of anxiety around imported commodities.
Be that as it may, we still believe the government should be more proactive. Interventions to better living standards of poorer households are of the essence. Ubos May figures show that the jump in the prices of the seven principal commodities are a sledgehammer blow to the poor.
Evidently, these low-income groups cannot wait it out.
Calculations from the International Growth Centre (IGC) have shown that “tariff reform would provide relatively cheap support to the poorest households.” The IGC also reckons removal of “excise provides modest gains across the income distribution, [moreover,] at an affordable cost.” Short of those interventions, the poor will continue to batten down the hatches as the wealthy benefit courtesy varied subventions.
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