Commodity prices have been on the rise in recent weeks and as expected there is a lot of chatter about and who is to blame for the inflation.
Government is the usual punching bag. This week prime
minister Robina Nabanjja made a statement in parliament outlining the causes of
the new inflation, mostly that the inflation is imported with increases in
global oil prices and the supply chains, which have not yet recovered fully
from Covid-19 lockdown. The ongoing war in Ukraine is expected to worsen
matters as those countries account for 30 percent of world traded grain and
other manufacturing inputs.
As a result, she explained, that there is very little scope
for government to positively affect prices.
In reaction opposition MPs suggested a suspension of digital
tax stamps on manufactured products as a way to bring prices under control.
They also proposed that government should stop marking fuel for internal
consumption, the cost of which is transmitted to the end users. Government
marks fuel to prevent dumping. Fuel which is in transit to other countries is
cheaper, since some taxes are not imposed on it, and if sold on the local
market would disrupt genuine suppliers.
Recent investigations by this paper have shown that the
increases come first due to the sharp increases in fuel prices we kick off the
year with. A liter of petrol cross the sh5,000 mark in January for the first
time. This was due to a combination of global fuel prices jumping to 14 year
highs and the blockage of fuel trucks at the Kenyan border earlier this year.
The health ministry had insisted that truck drivers needed to undergo covid-19
tests before they came into the country, which sparked a strike that affected
fuel supplies, which we have not entirely got over.
"The Uganda Bureau of Statistics (UBOS) reported that in
February petrol and diesel prices jumped 34 percent and 25 percent
respectively...
Fuel prices feed into everything so its no surprise that
this is a factor.
In addition, there were suggestions that some businessmen
have cornered the market for inputs in the manufacture of bar soap partially
explaining the doubling of bar soap prices in some places.
All this indicate make it clear for anyone to see that the
causes of our current jump commodity prices is really out of government’s hands
and will not give itself to any short term remedies.
In fact things will become worse before they become better
as Kenyan transporters are set to raise transport fees by five percent.
That being said it is clear that as long as road transport
dominates our trade as a country we will always be at the mercy of the wild
fluctuations in fuel prices.
If the MPs really wanted to be useful they should address
this issue, especially progress on the railway and water transport across the
Lake Victoria.
As it is now it costs almost twice as much --$5250, to move
30 tons by road than it does by rail --$2,800. But because it takes about two
weeks by rail compared to under a week by road, it’s no wonder businessmen
would rather use road. The discrepancy in times in transit has a lot to do with
underinvestment on our railways.
"MPs, if they were farsighted, should be pushing for investment in the railways, revamping of existing management and smooth operations as a matter of urgency....
While it does not seem to be an issue this time like it was
in 2011, another major driver of inflation is rampant spending by government.
MPs should keep an eye on this as a matter of course.
Some of the proposals the MPs are suggesting may even force
government into populist measures that lead to worse inflation.
In the mean time for the rest of us the solution to rising
prices is obvious, we need to cut our coats to fit the cloth.
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