Central bank governor says only fertilizers and seeds will be covered to lower the cost of production in agriculture and not all basic consumer goods
The government has downplayed calls for more subsidies to control inflationary pressures, saying it will instead maintain the existing fuel and agricultural inputs subsidies.
Responding to questions of whether the government should introduce more subsidies to reduce prices of key commodities, the central bank governor John Rwangombwa said:
“Subsidies are very expensive to any government, they have to be selective and targeted in terms of which Subsidies to give.
“It is difficult to give blanket subsidies to all commodities consumed in the country, they can’t be spread across all commodities facing pressures, no country across the world can do this to deal with inflation.”
He said the government carefully selected the sectors that directly affect the poor, for instance fertilizers and transport for subsidies. He added that if high inflation spills into next year, the government will decide on subsidies to deploy.
Minister for Trade and Industry, Jean-Chrysostome Ngabitsinze said subsidies in the agricultural sector helped to contain the cost of production, especially in the past three years, when prices of fertilizers, seeds and other farm inputs surged due to the effects of the coronavirus pandemic.
“It is true subsidies are not sustainable in the long-term, but targeted implementation of subsidies and close performance monitoring of that particular sector it has been deployed can help a lot.”
“It is a shared responsibility between government and consumers,” the Minister said.
President of Uganda, Yoweri Kaguta Museveni has insisted that subsidies are bad economics and he is not taking that direction despite the biting inflation.
The same view is shared by Kenya's new President William Ruto, who in his first actions after assuming office scrapped subsidy on petrol, saying it would cost the country $2.3bn by the end of the current financial year, in June 2023.
Dr Herman Musahara, an economist based in Kigali said although a case can be made for subsidies not being good, it helps to implement them in extraordinary times like these.
“If you offer subsidies in key commodities like fuel in a way you are easing the inflationary pressures because it will have an impact on other products in the market,” he said.