On May 1, President Museveni gave bold advice to Ugandans to substitute bread with cassava, if they can no longer afford the earlier.
“I hear some people are complaining that the prices of bread have gone high because of the current Russia-Ukraine war. Eat (muwogo) cassava I myself don’t eat bread,” he said
Museveni’s statement has since attracted public reactions where some people termed it as a final nail in the coffin where “the government indirectly told us that we can do nothing on the rising prices of bread and other commodities,”
“This reminds me of the recent statement by Prime Minister Robinah Nabanja when she said that we can use pawpaw leaves instead of soap, for bathing and washing clothes,” said a resident of Makindye in Kampala,
“Our government has both directly and indirectly abandoned us. While other countries are doing tooth and nail to rescue their people, ours is doing the opposite,” she added.
Sarah, a single mother of 3 and a resident of Luzira in Kampala works in a food kiosk near City Abattoir. She earns She6000 daily between Monday and Saturday.
“Imagine on that money I need to pay my rent of Shs100,000, buy food for my children, pay school fees and ensure daily upkeep. This inflation made me cut short some things like Tea, we currently bathe once a day because of the skyrocketing prices,” she said.
Sarah is not alone, a mini-survey conducted by DaParrot in different areas of Luzira, Mbuya, and Makindye show that 90% of the reached population shun things like Tea, luxury like furniture purchase among others
“My major focus is on food, we can do away with tea for a while, I passed a decree that one bar of soap should be used for one month, no unnecessary bathing, we focus on food and rent now, we shall enjoy when things go down,” Moses Kasango a resident of Mbuya, Kinawataka said.
Dr. Enock Twinoburyo, an economist and policy analyst who partially agrees with president Museveni told DaParrot in an exclusive phone interview said that the two items (bread and cassava) are not perfect substitutes to start with because the entire factor was narrowed down to bread and cassava but wheat is an input in many other items beyond bread
“The president’s analogy is that the causal factors for prices may be short-term and that the prices will subside with time. In economics, it is called a working theory, where when prices of a commodity are high and they are substitutes you move to substitutes to ensure sustainability based on the prevailing circumstances,” he said
“Subsitutablity can definitely cut across the board though this he says is based on the nature of the product including the elastic and non and thus can apply to everything,”
Since December 2021, the country has experienced skyrocketing inflation which rose from 1% to the current 4.9%, according to data from the Uganda Bureau of Statistics (UBOS).
Since late February 2022, prices of essential commodities including fuel, food, washing soap, and others have skyrocketed in the country.
The government has since tagged this on the devastating effects of the Covid-19 pandemic and the ongoing Russia – Ukraine conflict.
Between March and April 2022 for example, inflation rose by 1.2% from 3.7% to 4.9%.
Though the inflation is not as worse as that of 2011 which rose to 34.4% forcing people to demonstrate with the famous walk to work led by Dr. Kizza Besigye four times presidential candidate, the fact that the economy has just come out of covid-19 pandemic lockdowns makes it scary to most employees who have just resumed work.
Speaking to reporters last week, Dr. Chris Mukiza, the ED of Uganda Bureau of Statistics (UBOS) dismissed claims that the current situation will dive Uganda into an economic scourge.
“Inflation has not surpassed the levels of those days of Walk to Work in 2011. Inflation then was so high at 34.40% and last month it played out 3.7%,” he said
Mukiza said that the project is projected to rise but as we speak it is still low,” he assured.
Fuel Prices
The current inflation is further mainly tagged to persistent fuel prices which have shot up high, for example, the prices of Petrol and Diesel rose from 3700 and 3750 in December 2021 to Shs5400 and 5370 respectively. At a certain time, Diesel in Total petrol stations rose higher than Petrol.
“This has increased the cost of doing business for example it has increased the cost of transporting food items from village to towns, we cannot do anything unless the prices go down,” Stanley Ahimbisibwe, the Assistant Commissioner of Quality Assurance and Standardization at the Ministry of Trade, Industry and Cooperatives told DaParrot last month,
“The rising fuel prices are geared by international actors, this is not a Ugandan issue but rather an international issue, prices will go down once fuel prices go down on an international scale,” he added.
However, a recent March 2022 Economic Policy Research Centre (EPRC) Policy Report revealed that the government has the capacity to control 60% of the factors that are responsible for the rising prices of fuel locally.
The report titled: Drivers of changes in Uganda’s fuel pump prices during the COVID-19 Crisis revealed that well as international fuel prices (crude price) constitute about 40% of the pump price which the government can hardly control, the rest of the composition of the share of pump price (60%) are factors that government can influence through domestic policy like; taxation and costs related to distribution and fuel dealer’s margin.
“Governments’ effective fuel price regulatory interventions have significantly curtailed high fuel price spikes in some EAC countries,” the Policy Note reads in part.
It further revealed that five factors are majorly responsible for skyrocketing fuel prices and these include; oil demand and supply, taxation on fuel, the composition of Uganda’s fuel prices to identify drivers, the relationship between international and local fuel prices, and the extent of international oil prices and transmission to retail pumps.
“Governments determine the domestic components of fuel pump price variation through either taxation or subsidies, distribution, and marketing costs,” the Policy Note reads in part,
The findings of this report are a clear indication that the government can do something about the rising prices of fuel which in turn led to skyrocketing inflation.
In what appeared as the response however Hon. Matia Kasaija, the Minister of Finance, Planning, and Economic Development (MoFPED) said that issuing subsidies to businesses will not only dive Uganda into further economic turmoil but also enrich them.
“Subsidies tend to take money to the wrong people, not the ones you intend [to help]. Here we call them mafias. They can easily organize themselves and take all the subsidies. So, the Treasury will be funding them. We aren’t going to control prices either. That is bad economics. You control prices, you create so many unintended consequences,” he said recently,
Speaking at the inaugural Mutebile annual lecture at Makerere University last week, PSST Ramathan Ggoobi said that the full opening of economies globally after Covid had lessened has led to a swift rise in aggregate demand for a number of goods and services such as fuel, transport, education, etc. This, he said, has further increased prices.
“Since crises are like taxis; another one is often the way as one leaves the stage, the Russia-Ukraine conflict emerged as
Covid left the stage and has further disrupted the supply of goods such as oil, wheat, maize, and sunflower oil, as well as raw materials. The two countries are major producers and exporters of these commodities,” he said
Ggoobi reminded the general public that the causes of the current spike in prices are; Supply related, External and Global. Government policy
“In response, therefore, must focus on addressing the supply constraints most of which are external and affecting the entire
world. Anything else implemented would be a wrong medicine to a known ailment,” he said.
Daparrot understands that the economy operates in a free-market economy, where prices of goods are determined by market forces of demand and supply making it difficult for the government to fully regulate the prices.
That’s a Scapegoat Sour Economy Died Long Time ago-Betty Bamboozle
Speaking at the NBS TVs popular Barometer Political Show on Tuesday, April 29, Mukono municipality Member of Parliament Betty Namboozee said that the government should stop hoodwinking Ugandans with scapegoats but rather agree that the economy fell a long time ago.
“The Russia-Ukraine war found us when we are already doing bad, the mismanagement of Covid funds is part of the factors we are experiencing the government is using this as an excuse because they know the problem is worldwide,” she said.
Proposed Solutions; Experts Speaker out
While the government has recently changed the narrative saying that they could control some prices, Dr. Enock notes that we as Ugandans needed to put into consideration that the primary driver of this shock is coming
“The second-round effects of this energy pricing whether its an input into others projected by the central bank remain in single digit which will not allow increasing their central bank rate,” he said
He however questions to what extent will these prices remain sustained over a while noting that these were definitely short term remedies and do not address the sustainable problem
Speaking at the State of the Economy Dialogue on Thursday this week, Julius Mukunda, ED, of the Civil Society Budget Advocacy Group (CSBAG) said that the prices have increased, a fact that needs urgent solutions.
“We can look for reasons why. We can talk about the war in Ukraine and others, but even if you talk about these challenges, it is important to say, what are we going to do about it?” he said adding,
“We can investigate the causes for this. We can discuss the war in Ukraine and other issues, but it’s also vital to address the question of what will be done about them,”
Dr. Twinoburyo, therefore, notes that a long time of measures maybe could come in as a result of the production of Uganda’s oil. He however notes that the measures suggested shouldn’t be counterproductive while trying to control the prices, especially in the market-driven economy sighting that for example that would be the forgone taxes against the expected benefits
He adds that in Kenya when they issued a subside to keep prices constant but the government takes longer to pay their subside leading to a lot of arrears thus to delays and hodding of products by the oil companies since money wasn’t coming through and the same issue interest rate fixing when commercial banks were no willing to lend thus affecting the country growth since countries require credit to move.
“Government could, on the other side forego tax in order to reboot the economy, though noting that even if the government
forewent revenue the prices of fuel would still be higher than they were in the last ten five years thus still a flexible short term
solution since the foregone revenue would be so high and government couldn’t allow making such loses,” he said adding,
“On the issues of the private sector, in a market-driven economy its always about the forces of demand and supply and that therefore understating where the prices are shooting up from and that in our case demand had exceeded supply and thus making hard for the private sector to deal with it since inflation is coming from the supply side,”
He notes that there has been global supply disruption causing global high price rates which he says could be limited by constraining demand for example central banks increasing interest rates and governments having a more restrictive budget in order to manage demand.
“Even if the government tried to cut prices to boost demand it would end up increasing prices because there would be more aggregated demand and therefore prices unregulated and uncontrolled government was conscious that if prices are sustainably high more damaging to the economy than rebooting but should inflation spill over the central bank target then the government will then come in,”
What Gov’t is Doing
According to Ggoobi, the government has rolled out numerous interventions including;
a) Ensuring that we maintain a competitive environment to support a continuous supply of the goods and services whose stream is currently constrained – that is, fuel, soap, cooking oil, cement, steel, etc.- and avoid creating more
shortages. “We cannot afford to make demand outstrip supply. Most of the things some people want us to do are good common sense but very bad economics,”
b) Supporting farmers to grow more food to ensure we do not suffer food shortages. Food is the main driver of Uganda’s inflation. And;
c) We are also facilitating more exports to take advantage of the shocks, and earn more foreign exchange to pay for the now
expensive imports.
