Commodity prices are a key factor in influencing inflation rates because people indispensably need food, the Minister for Trade and Industry, Vincent Munyeshyaka has said.
Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.
Munyeshyaka was speaking during a news conference on the regulation of Irish potato prices in Kigali on Friday, along with the Minister for Agriculture and Animal Resources, Dr. Gerardine Mukeshimana.
He said that inflation rate in 2016, rose to 8.7% largely as a result of increase in food prices norm which normally should not have gone above 5% as regulations from the National Bank of Rwanda provides.
“The first thing that happens [when there is high inflation] is that many people cannot afford Irish potatoes, and as a result, they buy other commodities to replace Irish potatoes such as maize flour (Unga), and sweet potatoes. And, as people buy such food items, their prices also increase. That is why the country had high inflation in 2016, which.
He noted that the inflation significantly reduced to 2 percent in the third quarter of 2017 due to controlling prices of food commodities such as Irish potatoes, observing that if such performance gets maintained, the inflation will be effectively controlled.
According to the monetary policy and financial stability information by the Central Bank of Rwanda, inflation in Rwanda reduced to 2.2 percent in November down from 6.4 percent in November 2016.
Munyeshyaka said that some middlemen buy Irish potatoes as low as Rwf 70 a kilogramme but sell them at high as high as Rwf400 in Kigali, which causes unnecessary and unjustifiable inflation and farmers lose out.
“When Irish potato prices soar, they also drive up the prices for other commodities, which raises thre inflation rate,” he said.