Let economics provide solutions to high prices

We are all feeling the pinch of rising prices of fuel and other commodities. Everyone is digging deeper into their pockets to work or feed.

The public is looking at the government for short, medium and long-term solutions but none is forthcoming.

Last month, Finance minister Matia Kasaija moved to calm the nerves, arguing that there is no reason for alarm over rise in commodity prices here, saying that the increase is still much lower than elsewhere in the world.

He said the effects of Covid-19 restrictions across the world disrupted supply chains leading to high transport costs and shortage of intermediate raw materials used to produce items such as soap and cooking oil.

Amid calls for a suspension of some taxes, Mr Kasaija said the main causes of the increase in commodity prices are external and thus beyond the ability of policy makers in any one country to deal with directly.

In addition, the Finance permanent secretary, Mr Ramathan Ggoobi, has also stated that he doesn’t believe tax cuts are the solution. What should Ugandans do now? 

The bucks then stops with President Museveni who in his Easter message hinted on finding a solution.

“As we celebrate Easter, I know the issue of high prices for commodities is disturbing our people, I will meet with Caucus next week and we will discuss . Then I will address you on the matter. Happy Easter,” Mr Museveni tweeted.

You have every reason to doubt that the NRM parliamentary caucus has the magic bullet. This is an issue of economics which must be best handled by economists, not politicians hoping to catch the President’s eye.

Forums like the Uganda Manufacturers Association (UMA), Private Sector Foundation (PSF), Uganda Investment Authority (UIA), industrialists, traders and the investors’ roundtable, among others are better suited for the current debate.

Thereafter, the advice given by these would then be passed on to the President who in turn can present it to the caucus for backing when it’s presented before Parliament.

In the short run, tax freezes are welcome. A medium intervention could be stocking up on essentials to shield ourselves from external vagaries. The long-term solution is scaling up manufacturing.

Now is also the time to weigh whether the government’s import substitution gospel has ever gone beyond scholarly and policy books.

The overall idea is blocking imports of manufactured goods can help an economy by increasing the demand for domestically produced goods. The logic is that simple.