The Minister of Finance and Economic Planning, Matia Kasaija has called for calm noting that the rising prices of essential commodities will soon return to normal.
Kasaija revealed that the rise in prices is not limited to Uganda, saying, the prices in Uganda, are much lower compared with current global trends.
“The rise of prices in Uganda, however, is much lower compared with current global trends. Inflation has risen everywhere in the world including in advanced nations, emerging economies and poor countries. For example, annual inflation rate in the U.S. accelerated to 7.9% in February of 2022, the highest they have recorded in 40 years,” Kasaija told the media at the Uganda Media Centre on Tuesday Morning.
He said that at 3.2 percent in February this year, Uganda’s inflation remains within the target (of 5%) and one of the lowest in the region despite the increase in prices of some of the essential items.
He noted that the recent increase in the prices of essential commodities are a result of events that have occurred outside Uganda.
Kasaija stated that Uganda is a net-importer of intermediate raw materials used in production of items such as refined cooking oil and laundry bar soap.
He further stated that the effect of COVID-19 restrictions across the world disrupted supply-chains leading to higher transport costs and shortage of intermediate raw materials used to produce items such as soap, cooking oil and others.
“In the recent past, global economy has faced high shipping costs, a shortage of shipping containers, and higher fuel prices; leading to supply shortages globally. In addition, adverse weather conditions in South America has led to low production of wheat and edible oils,” Kasaija explained.
Kasaija also stated that the situation was worsened by the Russia-Ukraine conflict which he says, has further disrupted supply of oil, cereals such as wheat, corn, and sunflower oil, as well as essential metals like aluminium and nickel.
The two countries are major producers and exporters of these commodities.
“As a result of the above factors, prices of several commodities and services in Uganda have increased significantly and raised overall inflation,” he said.
According to information from the Uganda Bureau of Statistics (UBOS), cooking oil has registered the highest rise in price by 21% between December 2021 and February 2022, and a 77.6% rise in the past one year.
The price of Laundry Bar Soap has increased by 20% between December 2021 and February 2022, and by 47.8% in the past one year, while fuel (petrol) has risen by 15.3% in the past three months and by 34% during the past one year. Among other items.
As a result of the above statistics, the Consumer Price Index (CPI) for February 2022 increased to 3.2% from 2.7% in January 2022.
Kasaija noted that the prices of cooking oil and laundry soap have risen mainly due to the rising price of crude palm oil at international markets.
Approximately 70% of crude palm oil used as an input in production of these two commodities is imported. Manufacturers import this raw material mainly from Malaysia and Indonesia-the two leading surplus producers of palm oil.
In 2021, the two countries accounted for 84% of palm oil exports (Indonesia 59% and Malaysia 25%), however, in the past two years, crude palm oil prices have almost doubled.
Kasaija also explained that the domestic fuel prices have also increased considerably mainly due to an increase in international oil prices by over 70% between January 2021 and February 2022 leading to the rise in domestic pump prices, and Impact of the recent fuel shortages caused by a strike at the Uganda-Kenya border in Malaba related to Covid-19 testing requirements.
He says that this caused an artificial shortage of fuel.
He also blamed the rise in commodities to some unscrupulous speculators that are taking advantage of the situation by hoarding essential commodities, artificial supply shortages and drive-up prices.
He however said that the recent rise in prices of some of the essential goods and services is a temporary shock, having been caused by disruptions in the global supply chains due to Covid-19 and geopolitical tensions.
“The situation will soon normalize. We are monitoring the situation and will respond with appropriate policy interventions to ensure macroeconomic stability and affordable cost of living for all Ugandans. We will also ensure that we take advantage of these global crises to boost our Import Substitution Industrialization strategy to support private sector to produce domestically some of the intermediate goods used to produce most of the affected goods and service,” Kasaija said.
Kasaija called for calm saying this is a temporary situation that is going to subside sooner or later.
He reveals that through the Bank of Uganda, government will continue to monitor the situation and respond, whenever necessary, with appropriate monetary policy to ensure inflation stays within target and maintain macroeconomic stability.
“Government will continue to support our farmers to grow more food and vegetable seeds and cereals to take advantage of the rising global and regional prices to boost our export earnings, Government will also continue to support the citizens and businesses to recover their sources of livelihoods from the impact of the Covid-19 pandemic so that they can weather such shocks,” he said.
He revealed that the provision of funds such as EMYOOGA, money in UDB, Microfinance Support Centre and the Small Business Recovery Fund is meant to help Ugandans revive their businesses and offer employment and markets for products produced in Uganda.
Kasaija noted that government has completed all pre-conditions for production including securing the required financing and right of way for oil and gas related projects. “We will expedite implementation ofproject activities to ensure timely start of oil production to bring in more dollars to boost our reserves so that Bank of Uganda has enough arsenal to fight the inflation.”
He added that to cushion consumers against high fuel prices, government through the Ministry of Energy and Mineral Development is re-considering its regulatory role in the domestic fuel market to ensure that fuel price movements are a true reflection of the economic environment.
“In the medium to long term, we will continue to focus on infrastructure development, in particular road maintenance and the rehabilitation of the meter gauge railway in order to reduce on the time and cost of transportation,” Kasaija said.