Kampala. Pump prices of petrol have gone up even as the Shilling makes gains against the dollar.
The Shilling has gained about Shs200 against the dollar in the last two weeks, contrary to what experts had earlier predicted.
Currently, a litre of petrol costs Shs3,900 up from Shs3,800 it traded last week in Kampala, while upcountry, the prices are much higher with a litre costing as much as Shs4,000.
Industry palayers’ take
Industry players, have however, attributed the increased prices to both the foreign exchange and cost of borrowing that have gone up.
“We borrow a lot to import products, this has become very costly. We used to get loans at 7.8 per cent and this has since gone up to 11 per cent,” Hashi Energy group general manager –retail, Peter Ochieng said.
Mr Anthony Gatandi, the country manager Kobil Uganda, said: “The depreciation of the Shilling has seen the cost of doing business go up and the cost of borrowing in the last three months has affected price.”
Talking to Daily Monitor, Private Sector Foundation Uganda executive director Gideon Badagawa said: “The Consumer Price Index is now 8.8 per cent; however this is likely to run into double digits on account of fast moving food prices. Fuel as you know is a big cost driver.”
He said the likelihood is that Bank of Uganda will continue to do inflation targeting by raising the Central Bank Rate which will orchestrate higher costs.
“Remember it is at a time when investors are holding on to see what happens to our politics. So production has scaled back especially in agribusiness, industry and construction where we source most goods, services and works,” he added.
Mr Richard Kimera, the executive secretary Consumer Education Trust, an independent civil society organisation that fights for consumer rights, in his reaction said: “…the increase in fuel prices has an inclination to taxation.”
He said government needs to raise resources that are needed in the current political situation to drive the economy.
“Most of the costs are influenced by fuel prices. An increase in petrol or diesel has an impact on every consumer because most of the resources are driven by fuel,” Mr Kimera observed.
Mr Kimera cautioned consumers to use their limited resources knowing that they are in challenging economic, political and governance times. “I advise consumers to wisely use their limited resources at their disposal effectively to sail through the next three or more months,” he said.
In the last two week, the Shilling had been trading in the Shs3,690 range but by the end of trading on Thursday last week, it was in the Shs3,407/,3417 range against the Dollar.
A stronger Shilling, if sustained, is expected to reduce the costs of production.