What’s behind the rising food prices and inflation?

Evariste Mutibagirana, a large-scale banana farmer in Rwamagana District. Food prices have been going up in recent months across the country. Sam Ngendahimana

Food prices have been going up in recent months across the country raising concern among retailers and consumers with some afraid that the trend could persist further.

Increased food prices have consequently driven up inflation to 6.9 per cent as of November, from 4.4 per cent in October. This is beyond the Central Bank projections of 5 per cent.

Officials at the National Institute of Statistics of Rwanda (NISR) say that they are looking into the causes of the spike in food prices but indicates that preliminary findings show the main effect has been on maize and beans, which are among the most consumed in the country.

The rise in prices for maize and beans saw substitution to other foodstuff prompting increasing demand and driving up prices.

Such price hikes result from either reduced supply or increased demand.

Yusuf Murangwa, the Director-General of NISR said that from their studies, so far, supply has not declined and has been constant.

However, he said that there has been a growth in demand for food prices driven by growing consumption. The rise in demand, in turn, leads to higher prices.

Murangwa defended his pressure on demand explanation citing that, increasingly, demand in food commodities is occasioned by emergence of processing industries, exports which have been on the rise, emerging animal feeds industries and growth in population among others.

This, he said, over the long term can only be addressed by increasing the supply of food every season to take into account the rising demand.

The rise in prices is also the result of the seasonality of food production in the country and the region at large.

The New Times understands that a significant section exported their produce following the July harvest to neighbouring countries.

Food that is being consumed in the month of December is from the July harvest and stocks are running low ahead of the December-January harvest. Technically, this is the last bits of the harvests with most of the harvest from July having been sold over the previous months.

Early in the year, when there was a match between supply and demand, inflation was as low as 1 per cent.

“This is a common trend not only for Rwanda, but the rest of the region and beyond,” Murangwa said.

All factors remaining constant, the pressure on prices is expected to come down starting from January when the harvest season starts and consequently increasing supply in the market.

The statistics agency is also monitoring other factors that could have led to the state of affairs such as climatic conditions.

‘No impact on economy’

Finance Minister Uzziel Ndagijimana said that though the inflation was at 6.9 per cent as of November, it was not likely to have any dire consequences on economic growth. He said that they expect the trend to reverse when the harvest season begins.

The New Times recently engaged various food retailers in markets of Gikondo, Nyabugogo and Huye in Southern Province, who all expressed concerns on rising food prices.

Most noted that prices of foodstuff such as beans and peas have almost doubled to over Rwf1000 a kilo from Rwf600-800 in July.

Among the coping mechanisms is substitution to other foodstuffs such as rice and flour.

cmwai@newtimesrwanda.com

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