Commentary

It is in our interest to export only surplus

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By Andrew Bakoraho

Posted  Tuesday, February 4  2014 at  02:00

In Summary

This worsens when goods being exported are inadequately produced by the exporting country. Despite the agony caused by the war in South Sudan, Ugandans are now enjoying stable prices for the goods that were exported amid scarcity

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A country should only consider selling goods outside her locality if it produces more than what it consumes. Whether such exports involve raw materials or finished products, the priority must always be given to both local consumption and production before bringing into play the foreign markets. This should be done in the interest of price stability in any country.

Foreign earnings should only be realised from sales of surplus output of any production unit. This is more crucial when essential commodities like food are involved because they play a vital role in stability of prices in any given country. Should this be ignored, price instability would be the order of the day as it happened some years back when peace was restored in South Sudan.

This worsens when goods being exported are inadequately produced by the exporting country. Despite the agony caused by the war in South Sudan, Ugandans are now enjoying stable prices for the goods that were exported amid scarcity. We would have reaped hugely from this foreign market that came with the stability of South Sudan only if we were producing more than what we consume as a nation.

This situation has a lot to teach us as nobody actually benefitted economically from increased prices of our basic goods. For example, when food prices went up, farmers jubilated not knowing that schools and institutions where they send their children to study would find it difficult to feed these children and as a result, they too hiked fees.

Medical bills and the cost of other basic services too went up. Remember the middlemen who transact between farmers and final consumers, too fall sick and send their children to school as well; so in such a situation, therefore, nobody really benefits but instead the problem becomes vicious.

Price instability does not favour savings. Similarly, inflation and economic growth cannot take place simultaneously .These two situations are mutually exclusive. In such a period, people’s purchasing power is lowered and this also discourages production. Employers cannot increase wages as this would in turn increase the cost of production.

Even the government loses as it has to spend money on teargas to quell demonstrations such as the Walk-to-Work protests against high commodity prices.