Govt can nip cost of living crisis in the bud

Primary and secondary school pupils soon return to school with a growing consensus suggesting that the environment for their parents looks hostile to say the least. A perfect storm of the pandemic and Russia-Ukraine war has midwifed, perhaps unintentionally but not unsuccessfully, a troubling financial climate for Ugandans.

A recent study by Sunday Monitor showed that 94 percent of workers on the government of Uganda payroll can barely scrape by. Since running with that story, the feedback we have received from workers either in self employment or the private sector is that they too are struggling to get by.

The current inflationary pressures have made such an unyielding master. They have had an immediate effect on retail sales, with the economy showing growing signs of stress from the soaring cost of living. But while the reaction to rising energy prices (fuel and household gas) has triggered a marked slowdown in consumer spending, schools will have recourse against any belt tightening measures. Parents are already being cautioned against sending their children to school without paying-in slips.

This could be the start of what proves to be a chaotic mix of peril and promise. After shutting school doors to coronavirus for nearly two years, the Ministry of Education and Sports has been eager to make up for lost time. Longer academic terms and shorter holiday breaks have been proffered. This—while understandable, even reasonable—could spell doom. Longer academic terms translate into a bigger food bill for schools. It doesn’t help matters that sunflower oil exports from Ukraine and palm oil exports from Indonesia have shrunk and continue to do so. Consequently, the price of cooking oil in retail shops is about 20 percent higher than a year ago. Schools as such have a sound reason to increase tuition fees. But parents—whose wages have largely remained static—face the frightening prospect of having a shorter period not to be in a school’s bad graces. All of this makes it difficult to think of a good reason why the govt shouldn’t come up with short-term interventions. Ramathan Ggoobi, the secretary to the Treasury, ruled out any fuel subsidies, holding that they tend to benefit the “wrong people.” The role of the GoU, however, is to ensure that such a scenario doesn’t pan out in the first place.

We also reckon the govt can moderate food price increases through export restrictions. Uganda for instance exported $45.4m in palm oil in 2020. This made it the 27th largest exporter of palm oil in the world. Palm oil is multipurpose in the sense that it is used in cleaning products, cosmetics and frying fats. Its scarcity has placed extra strain on food and commodity prices. Restricting its export will loosen the noose around the neck.

We also believe reducing import tariffs and dispensing with value added tax on food can give cost-sensitive consumers respite. The inaction that ever existed anywhere but in the minds of the liberal economists will be a recipe for disaster.

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