Inflation is a regional problem

The cost of living is rising globally and is causing economic and political crisis across the world. The recent spate of revolutions in the Arab World was fuelled by inflation, and in our region, we have seen protests in Kenya and rioting in Uganda.There is 14 percent inflation in Uganda and this will eventually affect the whole region, fuel costs in Kenya will also affect us and we need a regional solution.
Rama Isibo
Rama Isibo

The cost of living is rising globally and is causing economic and political crisis across the world.

The recent spate of revolutions in the Arab World was fuelled by inflation, and in our region, we have seen protests in Kenya and rioting in Uganda.

There is 14 percent inflation in Uganda and this will eventually affect the whole region, fuel costs in Kenya will also affect us and we need a regional solution.

With the cost of living rising, many governments will feel the need for immediate measures to stem inflation, but this will most likely worsen the problem.

In Kenya, the government called for price restrictions on fuel, but then the suppliers held back their stock. It painted the suppliers in bad light and at least the government was seen to be doing something, but the price has gone up inevitably.

The effects of this inflation have been keenly felt in food and fuel prices, the two are often linked and correlate. On a global level, the genesis of this has been in the credit crunch, for more than a decade, cheap credit absorbed any effects of price rises.

The investors who previously traded stocks have moved into commodities like wheat, maize, beef, but the farmers fetch less.

People say that China and India are eating more, hence the price rises but all nations are consuming more than they did.

Energy costs have also been rising even though demand has not risen as such, oil is now under US$100 a barrel but it will take a three month lag to ease pressure on the market.

Fear is the biggest driver of price rises, with the Arab world in crisis, we face a threat to 70 percent of global supply.

Africans cannot control global events but we can control our regional factors better, we need a regional energy strategy to stabilise regional fuel prices. We need large reserves to stabilise supply or better distribution networks.

The reason why the price of fuel in Rwanda is steady is because the government owns 50 percent of the strategic fuel reserves which stabilises supply.

We need regional fuel reserves, every nation should hold at least three months reserves in line with consumption. Business people in EAC need to plan and cannot be held hostage to daily changes in price with fuel making up to 20 percent of the budget.

As for food, we need the same model of strategic reserves but regional levels of corruption have stifled this. There was a scandal in Kenya when a minister William Ruto was accused of confiscating tonnes of grain from the national reserve for personal gain.

The EU only started to control inflation when they took a collective approach to inflation causing factors like supply, monetary policy, tariffs, fuel duties, credit, wages, and human behavioural factors.

We need a similar approach to our problem because it is a domino effect, from Kenya to Uganda to Rwanda to Burundi and back the Tanzania .

Another policy we need is one that controls the effects of speculators and suppliers. Recently, the price of fuel went up 5 percent but transporters increased prices by 15 percent and this ends up affecting the price of every type of food.

We need variable taxation to limit the opportunity for price-gauging, if they raise, their prices disproportionately  then their taxes also go up disproportionately.

We will only control inflation with a long-term regional strategy. We should not take any short-term measures; we should work on strategic reserves and better distribution. We have always been a regional economy; and our policies need to reflect that.

ramaisibo@hotmail.com

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