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Rising prices: World Bank wants govt to intervene
Commodity prices have been rising since November last year. Photo | ALEX ASHABA
What you need to know:
Whereas government has previously said it will not intervene to control the current surge in prices of especially fuel, the World Bank says there must be targeted interventions, especially among vulnerable groups
Government must adopt targeted interventions to support vulnerable Ugandans, according to the World Bank.
Speaking at the 19th Economic Update in Kampala yesterday, Ms Mukami Kariuki, the World Bank country manager, said that whereas there is scarcity of resources and the challenge of debt, it is crucial for government to adopt targeted interventions to support the vulnerable, many of who have been severely affected by an increase in poverty.
However, she said, debt and inflation must be managed well.
“Whereas government is not planning to distort markets in responding to the rising commodity prices, targeted interventions are required to arrest the increase in poverty and food insecurity, especially in vulnerable population groups. As shocks are becoming more frequent and more intense, building shock responsive social protection systems at the national level has become a critical priority,” Ms Mukami said.
The call comes at a time when rising commodity prices, which World Bank said poses serious challenges to economic recovery, continues unabated.
Government has previously said it cannot intervene, in, especially control of commodity and fuel prices, which have almost doubled since beginning of the year.
The surge, according to government, is a result of global factors that are outside its own control.
However, the Word Bank noted, that government’s intervention is likely to be constrained by the limited fiscal space due to scanty in revenues, project execution challenges, and rising public debt vulnerabilities. Government is expected to close the 2021/22 financial year with a revenue deficit in the excess of Shs2 trillion.
This poses serious challenges on a number of commitments, among which include debt repayment which has grown above Shs72 trillion.
Therefore, Ms Mukami said, such challenges are likely to impact on how government intervenes to support venerable groups that have largely been affected by an increase in poverty.
The World Bank also noted that the rising commodity prices and the overall increase in cost of living pose new risks to livelihoods that had just begun recovering from the effects of Covid-19.
“These and other shocks are threatening to stall socio-economic transformation, thus increasing the likelihood of the people falling deeper into poverty,” Ms Mukami said, noting that economic growth had largely remained fragile due to multitude of risks with optimism, regarding expected acceleration of growth and a clearer outlook for oil production, being dampened by new global shocks.
Therefore, the World Bank noted, there was need to pay attention to priority areas, among which include acceleration of vaccination to avoid resurgence of Covid-19, targeted intervention to support the vulnerable, acceleration of efforts to invest and institutionalise the development of a national social registry of vulnerable households and strengthening and expanding of the digital payment systems to allow efficient and transparent distribution of support.
Monetary tightening
The World Bank has urged government to adopt a cautious monetary tightening in the face of rising inflationary pressures, arguing that monetary policy must maintain a delicate balance between curbing inflation pressures – that have intensified due to rising commodity prices and stronger demand following the reopening of the economy – and supporting the private sector and economy to remain on the recovery path.
