Since last year when inflation rose above 20 percent, substantial recovery has been registered.
Inflationary pressures have been cooling due to the fall in food prices as a result of the good performance of the agricultural sector, which grew by 15 percent last year propelling the general economic growth of 11.2 percent in 2008.
However, on Friday this week fuel prices went up by Rwf30, increasing chances of a rise in public transport fares.
Already, some sectors of the economy have started responding to this trend.
Following confirmation by Rwanda Utilities Regulatory Agency (RURA) that the committee of transport operators and the agency were discussing a possible increment transport fares, it is highly speculated that public transport fares will increase by Rwf100 in Kigali and Rwf50 on upcountry routs.
The increment in transport fares which is largely blamed on high fuel prices will definitely impact on the prices of other commodities, particularly food staffs that come from the countryside. Consequently, prices of other services will also go up.
These trends will definitely have a significant impact on the general consumer price index that has been falling in the recent past.
The RURA boss Col. Deogene Mudenge, told The New Times this week that, “We are currently reviewing the price year as we always do every now and then. The ministries of commerce and finance always review prices of different commodities and services and the Cabinet meeting approves the changes.”
This shows how the economy and the business community are likely to respond to the current trends.
An increase in the price of fuel can be socially acceptable if it can come with an increase in wages and salaries.
However, considering the high interest rates, tight liquidity and lower credit, reviewing workplace policies and forcing budget reviews can only add more pressure on employers.
But it is critical that employers and government pay careful attention to changing market conditions and develop appropriate contingencies and responses to manage through these changes. This calls for reviewing salary arrangements or revisiting operating budgets.
This can encourage savings among individual households while maintain their consuming levels.
The Writer is a Journalist