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Uganda: Govt Won't Fix Prices
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The Monitor (Kampala)
5 May 2008
Posted to the web 5 May 2008
Yasiin Mugerwa
Kampala
As prices of food and other commodities continue to sky-rocket, Finance Minister Ezra Suruma has told members of Parliament that the government will not fix prices.
"We cannot fix commodity prices because doing so is a hopeless way of managing the economy," Dr Suruma told the Parliamentary Finance Committee on Thursday. "For the government to come in and stop these soaring prices distorts the economy yet we don't want to go back to where we were many years ago."
Dr Suruma's comments coincide with President Yoweri Museveni's Labour Day remarks at Kololo where he said the soaring food prices are a "blessing" insisting that Ugandans would be motivated to increase food production and fetch bigger returns.
Although MPs noted that the government is struggling to rein in the rising inflation rate that has pushed prices to higher levels, Dr Suruma told the committee that over the years, the government has maintained micro-economic stability with the inflation rate retained at 5.7 per cent.
Discussing priorities for the 2008/08 Budget, MPs demanded that the government, through the Ministry of Finance, draws immediate strategies to sort out the soaring food and other commodity prices in the country.
"It's not enough for the government to say that they can't fix prices when our people are suffering," the Finance Committee Chairperson, Mr Gaudioso Tindamanyire (NRM, Bunyaruguru), said. "With the current poverty levels, any increase in commodity prices means people will go hungry, and we need urgent interventions before it is too late."
Prices of most food items, including those locally produced, have more than doubled since the start of 2008, raising fears that the country could be headed for a food crisis.
Bananas, potatoes, beans, beef and vegetables are reportedly exiting to foreign markets in South Sudan, eastern DRC and Rwanda, where there are growing and competitive markets.
But Dr Suruma told the committee that the high prices were imported from Kenya, Tanzania and DRC where the inflation rate is higher than that of Uganda. "We cannot go very far in fighting these prices because we import most of this inflation from our neighbours," he said.
"You will agree with me that it is not easy to control this inflation but we are determined to do everything possible to maintain it at 5.7 per cent because this figure is harmless." Soaring food prices have particularly hit the urban dwellers who make up about 15 per cent of Uganda's 30 million people. About half of the urban dwellers (2.6 million people) are very poor, forming part of the nine million Ugandans who live in abject poverty.
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MPs argued that the next National Budget should break the thoroughly unproductive cycle of providing short-term emergency approaches to global food security and soaring prices in the country.
According to the Directorate of Policy for Agriculture, a US-based organisation, the turmoil in world financial markets is also driving investors and speculators into the commodity markets, pushing up prices.
This trend is further inflating food prices, which were already on the rise in commodities markets due to the recent growth in first-generation biofuels such as corn, even though only 4 per cent of world grain is currently consumed in biofuel production.
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