President Yoweri Kaguta Museveni addressed the nation on the status of inflation during his State of the Nation Address held at Kololo Independence Grounds on Wednesday, 7, March.
The Prwaisent revealed that prices of domestic goods and services have come down compared to what they were one year ago.
He gave a few examples, like the price of edible oil which he said has reduced from UShs. 10,079 per litre in March, 2022 to UShs. 9,556 per litre in March, 2023; Petrol from a peak of UShs. 6,563 a litre to UShs. 5,138 a litre now, ordinary cement from a peak of UShs. 37,315 a bag of 50 kg in May, 2022 to now UShs.34,874.
He gave the good news that the country has surmounted the rapid increase in prices of both consumer and production prices.
He, however, said that food prices have remained high due to climate change effects that caused prolonged drought in many parts of the Country. This, he said is expected to become history because of the on-going Government investment in small- scale solar powered irrigation to address water shortages.
He explained why Government resisted price controls and subsidies when prices went up sharply. He explained that this was because these kinds of measures are not sustainable and they instead introduce distortions in the economy. “They bring about the old habits of smuggling (magendo) and can result in shortages of goods in the markets. This happens when some rich business people hide consumer goods to cause artificial shortages in order to benefit from higher prices.”
Museveni, further noted that some countries gave subsidies or controlled prices of some essential commodities such as fuel, bread, wheat, but his government does not believe in subsidizing consumption such as subsidizing petrol for people to drive to night clubs.
However, if prices are distorted by some non-economic factors such as sanctions by the West on account of the war between Russia and Ukraine, for inputs into production such as fertilizers, he said it may be logical to look at subsidies and they are studying this possibility.
The Preaident further explained that the policy of the Government is to allow demand and supply forces to determine prices and incentivize production.
However on the issue of fertilizers, he said they are considering either get a solution to stop the west from interfering with the prices of the fertilizers or providing subsidies.
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