The risk of further unrest in Uganda is still real despite an imminent fall in inflation to single-digit levels because of rising frustration at a lack of employment opportunities, a senior Treasury official has acknowledged.
The food component of inflation in Uganda has risen from 9% in February to 44% at the end of May, pushing up overall consumer inflation to a 17-year high of 16%, and fuelling street protests that international observers claim resulted in at least 10 deaths and hundreds of injuries.
Keith Muhakanizi, deputy secretary to the Treasury, believes the arrival of the new harvest onto the market should see prices fall significantly in the coming months.
“Even though we saw large year-on-year increases in May, food prices actually began to fall on a month-on-month basis, and with the new food season coming, we expect the food component of inflation to collapse,” he said. “We expect inflation to come back down to single digits before the end of the year, for sure.”
He said rising frustration at high youth unemployment was a major contributing factor to the dissatisfaction, especially in light of events in North Africa and the Middle East.
“The people protesting in Kampala were the youth, and youth unemployment is a major concern, so addressing it is now the number one priority, both on the economic and political side,” he said. “What happened in Egypt and Tunisia has made it the priority.”
He said the government was already taking steps to address the problem, providing short-term retraining programmes and cheap credit for unemployed graduates, as well as drawing up longer-term plans to overhaul the education system.
However, he acknowledged these measures might not be enough to calm anger and that this was true “not only in Uganda, but across southern Africa”.
“If people feel that the issue is not being tackled, it will have both political and economic consequences, and I think people may well be disappointed,” he said. “I think the issue can be addressed, but it will not be in the short-run and the risk is there will be more frustration.”
Muhakanizi insisted suggestions that inflation had been caused by an overly expansionary fiscal and monetary policy were wide of the mark.
However, he acknowledged that a decline in inflation might not be sufficient to appease protestors, despite the opposition’s recent announcement that it was cancelling its walk-to-work protests.
“Ugandans for a short period were shocked by food price increases and politicians tried to exploit it and there were protests,” he said. “But the protests also emerged from the elections, so there were political links as well. I’m optimistic that prices will come down, but I’m less optimistic that other issues will be resolved.”
Nevertheless, despite the possibility of further unrest, he insisted there was “no indication” Western donors would cut off foreign aid to the country, despite widespread threats from European nations in particular to do so following the authorities’ violent reaction to the protests.
“We haven’t got any indications at all that aid is going to be cut, in fact the British increased it,” he said. “But we are concerned about this possibility, and are working hard to ensure that aid is not drained or cut.”