7 July 2018

Uganda: Rising Fuel Prices, Higher Taxes to Push Up Kenya, Uganda Inflation

Photo: The Guardian
Fuel pump

Kenya and Uganda face a higher cost of living in the second half of this year, driven by a surge in fuel prices, increased taxation and weakened local currencies.

Reports by their respective central banks have said that this will translate to higher import bills.

In Kenya, goods and services prices will be pushed up by the increase in the international price of crude oil and the imposition of a 16 per cent VAT on petroleum products starting September.

Central Bank of Kenya Governor Patrick Njoroge said that while inflation remained below five per cent between November 2017 and June 2018, this is set to change in the short-term, exposing households to higher prices of goods and services and erode their incomes.

"Inflation was at 4.3 per cent in June 2018 and has remained below five per cent for an extended period. So, of course, there is upward pressure," Dr Njoroge told the Moody's East Africa summit held in Nairobi.

Inflation dropped to 4.28 per cent in June 2018, from 11.48 per cent in April 2017. In May it was at 3.95 per cent due to the increased cost of food, fuel, electricity, water and cooking gas.

The Organisation of Petroleum Exporting Countries and its allies, started cutting oil production in January 2017 and is expected to maintain upward pressure on oil prices.

In Uganda, inflation increased to 2.2 per cent in June from 1.7 per cent in May with the Bank of Uganda warning that increased oil prices, increased taxation and weakening of shilling against the dollar would further drive prices of goods and services upwards.

"Inflation is projected to rise faster than previously projected but remain within the five per cent target in the next 12 months," said Bank of Uganda Governor Emmanuel Tumusiime-Mutebile.

Tanzania and Rwanda have not yet released their inflation figures for June 2018 but in Tanzania, inflation for May decreased to 3.6 per cent from 3.8 per cent in April due to a decline in food prices.

"It is expected that the headline inflation will remain at single digit despite threats of increasing commodity prices in the world market, in particular rice and petroleum products," said Bank of Tanzania.

In Rwanda inflation for May increased to 1.8 per cent from 0.9 per cent in April due to higher food, housing, water, electricity and fuel prices, according to Rwanda's National Institute of Statistics.

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