The Causes and Effects of High Commodity Prices in Uganda Giving Solutions on how to Overcome Them

Abstract

This study focused on assessing the causes and effects of high commodity prices in Uganda based on three main objectives that included; assessing the causes of high commodity prices in Uganda, examining the effects of high commodity prices in Uganda, and establishing solutions on how to overcome high commodity prices in Uganda and to establish solutions on how to overcome high commodity prices in Uganda. The study adopted a cross-sectional research design whereby a sample size of 248 respondents was selected from a population of 700 using a simple random sampling approach; 187 responded, indicating a response rate of 75.4%. A five-point Likert scale structured questionnaire was used to collect data. Data were tested for reliability, analyzed using SPSS v23, and results were presented based on the study objectives.   Findings indicated that there are still causes of high commodity prices in Uganda, such as government subsidy fluctuations, labour cost fluctuations, the Global spread of COVID-19, the escalating geopolitical risk, and the systemic uncertainty in the commodity markets due to the Russian–Ukraine war in Ukraine, increased demand from the local consumers, increased demand from neighbouring countries, supply variability, globalization, and monetary inflation. The high commodity prices have some effects, such as demand weakness and supply disruptions, the proportion of commodities in the consumer price basket, deterioration in fiscal accounts, and improvement in the Current Account balances through better Terms of Trade. Hence it was recommended that subsidies granted and tariffs imposed by the government on commodities in Uganda should be grounded on facts about their impacts on price fluctuations and, eventually, their consequences on the profitability of the market. The government should reduce taxes to create instability in markets, improve supply chains of the main commodities, and government or third-party intervention in the market to manage commodity prices in Uganda.