Inflation rises across East Africa on spike in food, fuel prices

Friday January 20 2017

A rise in food and fuel prices has seen

A rise in food and fuel prices has seen regional economies, save for Kenya, record an increase in their December inflation figures. TEA GRAPHIC | NATION MEDIA GROUP 

By ALLAN OLINGO

A rise in food and fuel prices has seen regional economies, save for Kenya, record an increase in their December inflation figures, even as analysts warn of an expected upward spike in the medium term, as countries start adjusting fuel pump prices upwards.

Kenya’s inflation eased to 6.35 per cent in December on the back of falling cooking gas prices, from a nine-month high of 6.68 per cent in November.

Tanzania recorded a slight increase in its December figures to 5 per cent from 4.8 per cent the previous month, while Uganda also saw its figures rise to 5.7 per cent from 4.6 per cent in November. Rwanda’s cost of living on the other hand rose to 7.3 per cent, up from 6.4 per cent in November.

Low global oil prices saw the region’s cost of fuel at the pump, electricity and several food items drop significantly, pushing the inflation figures down last year.

However, all this has been undone as the basket of goods, that is used to calculate the cost of living, has risen. The higher food prices come at a time the region is facing food shortages.

In Kenya, food items that make up 36 per cent of the basket of goods used to calculate inflation, pushed up inflation from 5.8 per cent in June. According to the Kenya National Bureau of Statistics (KNBS), maize flour, tomatoes and sugar are among goods that recorded a significant rise in their prices, pushing the food index up by 1.31 per cent.

“The drop in the costs of refilling cooking gas helped ease the inflation even as the increase in prices of several food items significantly outweighed the decreases of others,” KNBS said.

Food shortages

In Uganda, poor weather conditions that have led to food shortages in many parts of the country, contributed largely to the food price increases. In December, the annual food crop inflation rose to 10.8 per cent from 7.2 per cent in November, while fruits inflation increased to 24.8 per cent last month from 13.6 per cent the previous month.

The director of macroeconomic statistics at the Uganda Bureau of Statistics (UBoS) Chris Mukiza said that the country will still experience high food prices due to the current weather conditions.

“Prices of the annual average food crops and related items dropped to 3.1 per cent last year, compared with a 6.7 per cent rise recorded the previous year. This will, however, be negated by the current rising food prices in the market due to bad weather, that has affected crop production in parts of the country,” said Dr Mukiza.

The Tanzania National Bureau of Statistics said the price increase for commodities in December pushed the inflation rate for food to 7.4 per cent from the 6.4 per cent recorded in November.

In Rwanda, the food element saw the highest rise of 16.4 per cent, as the country also battled food insecurity, turning to Uganda for maize imports.

Pump costs rise

Kenyan and Tanzania motorists will now have to contend with higher fuel prices after their respective energy regulators adjusted prices upwards mid-December, based on recovering global oil prices.

In Kenya, the Energy Regulatory Commission effected the month on month raise in the prices of diesel and petrol, which saw a litre of diesel rise by an average of $0.05 to retail at $0.83 a litre while petrol was up by an average of $0.03 to retail at $0.90 a litre.

Tanzania’s petrol prices rose while the cost of diesel and kerosene dropped as the country’s central bank sought to bring down transport costs, in a country that depends on road to move 90 per cent of its passengers and 75 per cent of the freight.

“The wholesale prices for diesel and kerosene have decreased by 3.91 per cent and 2.25 per cent respectively, while the cost of petrol has increased by 0.01 per cent,” Tanzania’s Energy and Water Utilities Regulatory Authority said.

Pump prices stand at Tsh1,890 ($0.83583) for petrol and Tsh1,732 ($0.76596) for diesel currently.

In Uganda, the annual average inflation for energy fuel and utilities for last year increased to 3.9 per cent, compared with 3.5 per cent registered in 2015. In December, transport services saw an increase of 5.2 per cent from 2.9 per cent in November due to rising fuel costs.

Electricity bills

Uganda’s energy, fuel and utilities prices also rose by 2.8 per cent from 4.8 per cent due to a 6.7 per cent rise in the cost of liquid fuels. Already, the country has seen an increase in its fuel prices in the past two months, with diesel increasing by an average of 10.8 per cent to retail at $0.72 currently.

“The increase in the cost of transport was due to the rise in fuel costs, maintenance and repairs which saw several price hikes,” UBoS said in a statement.

Last month, the Bank of Uganda lowered its benchmark lending rate by 1 per cent to 12 per cent buoying confidence that inflation will remain around the 5 per cent target.

In Kenya, the cost of power bills also rose in the review period due to an increase in the fuel cost levy as a result of increased use of expensive diesel-generated electricity, rising to $0.03 per kilowatt hour (kWh) in December from $0.02 a unit a month earlier.

Electricity costs in Rwanda rose by 7.7 per cent pushed by a rise in the cost of power and fuel.

Businesses that depend on power for manufacturing have decried the rising cost of power as this is eventually passed to the consumers, impacting household budgets.