Prolonged shortage of foodstuff in local markets is to blame for the increase in prices of goods and services, analysts have said.
They called on the Government and other stakeholders to step up efforts to boost agriculture output and production of other locally-made goods.
Rwanda’s inflation rate increased to 8.1 per cent in February compared to the same period last year, according to the latest Consumer Price Index (CPI) report.
The report, released last week by the National Institute of Statistics of Rwanda (NISR), indicates that the inflation was mainly driven by rising prices of food and non-alcoholic beverages, rising prices for housing, water and electricity, as well as gas and other fuels, while transport costs went up too.
Rwanda uses urban CPI to measure inflation – the movement of prices for selected basket of goods and services – over a given period of time.
According to the NISR report, the increase was mainly due to the rising prices of food and non-alcoholic beverages, which rose by 17.6 per cent, housing, water, electricity, gas and other fuels whose prices rose 2.1 per cent and transport costs, which rose by 8.3 per cent last month compared to February last year.
The underlying inflation rate (excluding fresh food and energy) was up by 5.6 per cent during the month, which some economists say is a moderate increase.
In January, inflation was recorded at 7.4 per cent and, therefore, the 8.1 per cent rise in inflation rate a “cause for concern,” according to François Kanimba, the minister for trade, industry, and East African Community affairs.
One of the prominent economists told The New Times that 8.1 per cent growth in inflation with underlying inflation at 5.6 per cent shows how scarcity of food has put pressure on the economy.
“It shows how food has been putting pressure on everything else,” the economist said, preferring to remain anonymous for the purpose of providing an independent view from his company.
The underlying inflation rate, which economists also call ‘core inflation,’ reflects the long-term trend in a particular price level and it is a measure of inflation that excludes certain items that face unstable price changes, such as food and energy products.
Food and energy products are normally removed from the measure in order to get the overall trend of inflation because they tend to have temporary price shocks which can differ from the overall trend of inflation and give a false measure for it.
Dr Charles Ruhara, a lecturer at the University of Rwanda’s College of Business and Economics, said the country has been experiencing food supply challenges over the past year.
“I think there has been low supply of food products over the last year. The increase in food prices shows that demand was higher than supply because of the long drought the country experienced last year,” he said.
The don urged the Government and other stakeholders to step up efforts and find ways to mitigate the impact of climate change in order to improve agriculture production and counter inflation.
Better land use and introduction of new varieties of crops that can withstand climate changes, improving on climate predictions, and practicing irrigation are some of the mechanisms that can help mitigate the effects of the climate change, he said.
Ruhara also recommended that the Made-in-Rwanda campaign be enforced with more vigour to boost local production and limit importation of goods, arguing that this is one of the factors behind the increase of prices on the market.
Prices for imported goods increased 8.8 per cent in February 2017 in comparison to February last year, which Dr Ruhara says should be controlled through scaling up local production.