SPECIAL REPORT

Election Season in Uganda Triggers Higher Cost of Living, Frustrations for Residents

 
 
Shah Rais Khan, at his restaurant in Kampala, says operating costs have increased, and he’s been forced to push up his prices. The Ugandan shilling has depreciated against the U.S. dollar, which experts say is linked to Uganda’s upcoming elections. Apophia Agiresaasi, GPJ Uganda
Uganda

Political uncertainty, among other factors, has caused a depreciation of the Ugandan shilling against the U.S. dollar, triggering a rise in prices of basic commodities.

KAMPALA, UGANDA — Anne Nshekanabo can’t wait for the election season in Uganda to end. Prices for most essentials have gone up and she believes the campaign season has something to do with it.

“A dress I used to buy at 50,000 shillings ($14) now goes for 70,000 shillings ($20),” says Nshekanabo, a housewife.

Rice, macaroni, vegetables and fruit all cost more now than before the campaign season began, she says.

“We used to buy the small pack of macaroni at 1,500 shillings (43 cents), now it is 1,800 shillings (52 cents). The cost of rice has gone up by 300 shillings (about 1 cent),” she says.

Nshekanabo says she’s cut back on buying new clothes so she can have enough money for food. She hopes the high prices are a temporary trend, and that they’ll return to normal after presidential and parliamentary elections scheduled for Feb. 18.

If the dollar comes down to at least 3,000 shillings (87 cents), we will get some relief.

The Ugandan shilling has also depreciated about 21.4 percent against the U.S. dollar between December 2014 and December 2015, according to the Bank of Uganda. Many currencies have eroded in the face of a strong U.S. economy, but in Uganda the loss of value triggered a rise in fuel prices and the cost of imported goods. Experts attribute this to political uncertainty, a common element in Uganda’s elections.

Investors hold off on business in Uganda until after elections, says Ibrahim Mike Okumu, a lecturer in the College of Business and Management Sciences at Makerere University.

“Elections inform investment decisions,” Okumu says. “Investors have to ask themselves, ‘Should I bring in money now or after elections?’”

Inflation in Uganda rose to 9.3 percent in December 2015, up from 1.8 percent in December 2014, according to the Bank of Uganda. The main driver of inflation was food prices, which rose 18.6 percent for the year ending December 2015. The Ugandan shilling depreciated against the dollar, trading at 3,363 shillings on average in December 2015 up from an average of 2,769 shillings in December 2014.

The gains in the U.S. dollar against the shilling have also increased fuel prices and consequently prices of other commodities, says Sam Kaisiromwe, a senior statistician at the Uganda Bureau of Statistics.

That has business owners in Kampala struggling to pay their bills.

Shah Rais Khan, the managing director of Antonio’s, a restaurant in the city, says he increased prices of food and drinks in August 2015 due to the high cost of imported goods.

Rent also costs him more these days, he says, because that bill is fixed in dollars.

It’s not the first time an election has sent prices up, he says. The 2011 election brought high inflation, too, he says.

Election-related inflation isn’t unique to Uganda, says Charles Ocici, an economist and executive director of Enterprise Uganda.

Inflation is driven in part by a government’s borrowing and spending on campaigns, which aren’t economically productive activities, he says.

A dress I used to buy at 50,000 shillings ($14) now goes for 70,000 shillings ($20).

Jim Mugumya, the public relations officer for the Ministry of Finance, Planning and Economic Development, says the government has taken measures to stabilize the economy. The Bank of Uganda sold U.S. dollars to the interbank foreign exchange market in July to stabilize the shilling.

The bank has also raised its policy interest rate, known as Central Bank Rate, five times last year to curb inflation.

Khan, who works at the restaurant, is hopeful that the cost of living will come down after polls close this month.

“If the dollar comes down to at least 3,000 shillings (87 cents), we will get some relief,” he says.

Okumu, the lecturer from Makerere University, says the cost of living might come down depending on the macroeconomic environment and amount of money politicians put in the economy during the campaign season.

“If there is fiscal indiscipline, the dollar rate will remain high but if there is prudent spending, then inflation might come down,” he says.