Rwanda: Why Consumer Price Index Rose By 11.5%

The Consumer Price Index in Rwanda increased by 11.5 per cent between July 2019 and July 2020, according to latest figures from the National Institute of Statistics of Rwanda (NISR) on August 10, 2020.

This, according to NISR, means that for an item which was costing Rwf500 in July 2019, the price rose to Rwf557.5 in July 2020.

The statistics are contained in the Consumer Price Index (CPI) JULY 2020 released by NISR.

CPI is a measure of the average change in prices, over time, of goods and services purchased by households, such as food and transportation.

According to the figures, Urban CPI increased by 9.2 percent in July 2020 compared to the same month of 2019, while Rural CPI increased by 13.2 percent on annual basis and increased by 1.6 percent on monthly basis.

The annual average inflation rate between July 2020 and July 2019 was 7 percent.

In urban arears, prices for food and non-alcoholic beverages increased by 11.9 percent; while alcoholic beverages, tobacco and narcotics increased by 25.1 percent in July 2020 compared to July 2019.

Housing, water, electricity, gas and other fuels' increased by 4.3 percent and transport increased by 22.6 percent.

On an annual basis, the local goods index increased by 10.1 percent, the imported goods index grew by 6.3 percent, while the fresh products index increased by 19.6 percent. Fresh products are food products which have seasonal fluctuations. The energy index increased by 5 percent.

Prices of some food items have gone up significantly. This is the case for beans which went up from Rwf450 a kilogramme in 2019 to Rwf650 a kilogramme in parts of the country such as Burera District in Northern Province even during bean harvest season (in July 2020).

At Kimironko Market in Gasabo District, the price of mangoes more than doubled from Rwf1,000 to Rwf2,500 a kilogramme, according to fruit dealers.

Still at the same market, mandarin (citrus fruit), a kilogramme saw its cost jump from Rwf1,500 to Rwf2,500, a more than half rise.

Factors that drove up such price include the shortage of supply compounded with disrupted trade with Burundi which constrained import of such fruits into Rwanda, according to information from the Rwanda Agriculture Board (RAB).

Dr Canisius Bihira, a socio-economist told The New Times that inflation and insufficient domestic food production are to blame for the rising prices that push up the cost of living.

"Agricultures is still lacking in technologies, which affects farm productivity and the production of food, hence leaving a gap to be filled by imports," he said citing sugar and rice imports.

"The country should do its best to increase agricultural production among others, so that prices go down. It should also protect its currency in order to protect its purchasing power from decline," he said indicating that the Rwandan franc has depreciated almost by half against the dollar in less than a decade.

Some causes of CPI increase

NISR explains that there was a low production for commodities such as bean in the first agriculture season (Season A) of 2020 due to heavy rain, and flooding of some marshlands for rice plantations.

This situation, it said, caused the shortage of such commodity on the market as shown by the increase of 17 percent in prices of food and non-alcoholic beverages.

In the transport sector, NISR indicated that in the framework of stopping the spread of Covid-19, the number of passengers in buses was reduced.

The statistics institute said that for the sustainability of this important service, the bus transport fare was increased and resulted in the overall rise of 22.6 percent in transport tariffs.

On the implications of such CPI increase, NISR says that in the short term, this is the normal behaviour of the price trend when there are shocks like those that are highlighted above, adding that when shock disappears prices tend to become normal.

However, the institute says that if an upward trend in prices continues in the long term, it means the purchasing power of household keeps reducing.

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