A recent report by World Bank indicates that in time ahead, terrible inflation will take a heavy toll on Uganda and her closest East African neighbors like Rwanda, Burundi and Democratic Republic of Congo (DRC).
The economic situation in third world states is likely to worsen to alarming levels, plunging citizens into never seen deteriorating and dire living conditions, World Bank warns.
Uganda will not survive high global inflation coupled with sluggish economic growth, as per predictions from Global Economic Prospects Report by the global financial body.
Devastating effects of Covid-19 restrictions and later on Russia’s war in Ukraine, led to the disruption of supply chains, commodity markets, and financial conditions in developing countries.
It is phenomenal to assert that the war in Ukraine has disrupted the global cereals trade, and worsened food shortages.
Against this background, Uganda and DRC, which are largely dependent on Ukrainian cereals are likely to experience sustained and elevated food inflation.
Adding yeast to the already fermented bread, Uganda and her friends according to World Bank, have experienced planting delays because of poor rainfall, further raising prospects of a looming food insecurity.
Worse still, the report states that the war in Ukraine has significantly disrupted global fertilizer supply, owing to the fact that Russia is the world’s largest fertilizer exporter.
“Higher prices of fertilizers and fuels are expected to weigh heavily on farming output as well,” warns the report, adding that fiscal policy, already constrained by high public debt and tightening global financial conditions, have become increasingly unbearable.
“Moreover, rising core inflation in several countries Cameroon, Nigeria, and Uganda points to broadening price pressures, further reducing room for accommodative policies. Growth in Sub-Saharan Africa is projected to decelerate from 4.2 per cent in 2021 to 3.7 per cent in 2022, as high inflation and policy tightening weaken domestic demand,” reads the report.
Indeed, the situation seems to be taking a more desperate trajectory as pleas to rewind the state of affairs by concerned citizens have fallen on deaf ears of authorities, for instance; in the past weeks, Dr. Kizza Besigye’s calls for government to slash commodity prices, by reducing taxes on imports were met with fire and fury by Police.
Unfortunately for Uganda and her low income allies in East Africa, the growth outlook is anticipated to further deteriorate as a result of the global economic slowdown, in addition to increased costs of living, according to the World Bank top report.
Also according to the report, this kind of recession could eventually result in a sharp tightening of monetary policy in advanced economies, making the situation even worse, leading to financial stress in some emerging markets and developing economies.
“A forceful and wide-ranging policy response is required to boost growth, bolster macroeconomic frameworks, reduce financial vulnerabilities, and support vulnerable groups,” reads the report.
The report further stipulates that aggregate growth in low-income countries (LICs) is forecast at only 4.1% in 2022 and 5.3% in 2023 – 0.8 and 0.6 percentage points below the January projections.
In emerging economies, higher prices of grains are expected to limit the ability of farmers, especially those dependent on subsistence agriculture, to purchase enough seeds for the new planting season and feed for livestock, according to World Bank survey.
Work Bank researchers also found out that spending pressures like resorting to local substitutes, abstentions, all measures to curtail the impact of rising prices have been building in many countries, for example, fuel subsidies in Cameroon, Kenya, and Nigeria, a fuel levy reduction in South Africa, further plummeting the currencies of those states and worsening fiscal conditions.
Accordingly, growth is projected to firm slightly to an average of 3.9% in 2023-2024, assuming further progress with pandemic containment measures, as per the report.
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