Uganda warned against speculation ahead of today’s Kenya elections
Posted Monday, March 4 2013 at 02:00
As Kenyans go to polls today, Ugandans have been warned against speculative tendencies that might trigger the destabilisation of the economy.
Uganda has been grappling with a challenging economic environment characterised by double digit inflation, high interest rates, weak shilling and high fuel and food prices in the second half of 2011 through the best part of 2012.
However, today’s election in Kenya continues to send jitters among East African member states that use the Mombasa Port in Kenya as their main link to the sea.
When the violence broke out in 2007, business in Uganda was crippled with trucks ferrying goods to Uganda blocked, looted or even burnt by rioters.
The past experience is creating tension among traders, some of whom are said to be hoarding merchandise in anticipation of what might happen.
The director macroeconomic statistics, Uganda Bureau of Statistics (Ubos), Dr Chris Ndatira Mukiza, said last week that speculation might drive up inflation; which might in turn force government to take tight measures thus working against gains made so far.
It should be remembered that when inflation rose to 30.4 per cent in October 2011, Bank of Uganda raised its benchmark lending rate – the Central Bank Rate – to 23 per cent, a move that saw commercial banks raise their prime lending rates to close to 30 per cent.
Despite the CBR being eased to 12 per cent in February this year on the back of falling inflation, many commercial banks’ prime lending rates have remained high, averaging at 20 per cent, which remains high for the average borrower thus constraining growth in private sector credit and aggregate demand.
The Consumer Price Index released by Ubos last week indicates that inflation eased to 3.4 per cent in February from 4.9 per cent in January. It has been reported that some fuel traders have already started speculating, something that has resulted in a hike in pump prices.
For instance fuel prices had by Friday last week increased by about Shs200 from Shs3,650 for a litre of petrol a week ago to Shs3,850 while a litre of diesel had increased to Shs3,550, up from Shs3,450.
Kobil Uganda general manager, Werner Griesseo, was quoted by this newspaper last week saying that there was growing fear from landlocked countries neighbouring Kenya including Uganda, Rwanda and Burundi which largely depend on the Mombasa port for trade that businesses might be paralysed if the elections turn violent like in 2007/08.