Tackling rising commodity prices

Paul W. Wamimbi

What you need to know:

We must engage our knowledge and inventiveness to help the most vulnerable communities in addressing their long-term commodity security issues...

Steep price increases have surprised most economic forecasters. Policy reactions require multilateral coordination and decisions. That is why we need serious attention to the impacts and outlooks for our country of the current spike in commodity prices.

The situation is already having serious consequences. It could set back welcome progress in many developing regions towards growth, development and poverty reduction. Although most Ugandans are projecting that commodity prices will fall back from the present high levels, it seems clear that they will remain well above earlier trends. The government and the international community need to work closely together to tackle this problem.

The causes of the problem are complex and varied - with cyclical and structural dimensions that are mutually reinforcing. The consequences for a country like Uganda has many dimensions; some good, some bad. Higher prices should promote badly needed investment in agriculture and increased supply over time. For some, “the solution to high prices is high prices”. This is a commonly accepted principle.

But poor people, particularly those living in urban areas, are already suffering; either directly, from reductions in the amount and quality of food they can afford; or indirectly from having less money to spend on health, education and other longer term determinants of their ability to get out of poverty.

The crisis demands quick and effective policy responses. First, there are immediate and urgent needs for food aid and humanitarian assistance to stop poor people going hungry. 

But we also need to actively communicate a strong, evidence-based analysis of the causes and consequences of rising commodity prices, with a particular focus on effective policy responses.

Therefore, the upcoming national budget I am proposing to launch a serious multidisciplinary (“horizontal”) project on this issue. It will include monitoring developments in the short-term and convening a series of high level events where districts can jointly consider solutions (in areas like subsidies, seed technology, water and land use, yields and productivity, economic and financing issues, agricultural policy issues and trade).

For the medium term, we have to make sure the purchasing power of poor commodity consumers is improved so they have better access to commodities, even at higher prices.

A broad approach will be necessary, to relate the commodity price issue with a strengthened agenda to promote development in poor areas. This is an especially challenging task for the development co-operation community.

Rising commodity prices are turning into a real planetary emergency. The variety and complexity of its causes demand a major collective response. The government should uniquely position to provide such a broad assessment and the necessary multi-disciplinary solutions.

As we develop a horizontal initiative to produce medium-term, whole-of-government policies, I will be counting very much to explore and support innovative options to help Ugandans address this calamity.

With the same creativity and sense of opportunity with which some investors are now trading in futures of commodities, we must engage our knowledge and inventiveness to help the most vulnerable communities in addressing their long-term commodity security issues, while turning their productive sectors, where possible, into genuine engines of development.

Mr Paul Wanaye Wamimbi,

Industrial Division,Mbale City Council.

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