Inflation Hits East Africa amid Expectations of Lower Growth Rates

East African countries witnessed a rise in fuel and commodity prices, amid expectations of a decline in growth rates.

As soon as countries caught their breath from the coronavirus pandemic, price crises came to increase the impact of the economic crisis, according to official reports issued by the central banks of this region.

The inflation rate was 6.29% in Kenya, 3.2% in Uganda, 4.2% in Rwanda, 3.8% in Tanzania, 13.3% in Burundi, and 5% in the Democratic Republic of the Congo (DRC).

Uganda has seen fuel supply disruptions since January, as a liter of gasoline costs $3, and Kenya has experienced a shortage, which has paralyzed public transport services.

Tanzania raised prices by more than 11% for gasoline and diesel, and 21% for kerosene, and the DRC recorded the lowest price in the region for a liter of gasoline this week at $1.04.

The rise in prices in East Africa continued, to affect food prices, according to the "Global Price" periodical, where it reported that the Food and Agriculture Organization "FAO" saw that the repercussions of the war on Ukraine from the Russian side would raise food prices in Africa, which depends on imports in a feverish manner.

Ken Gichinga, chief economist at Mintoria Economics, said East Africa's import culture has left it unprotected, with local production neglected and food and feed prices rising by about 20%.

In Tanzania, prices of basic commodities such as edible oil, sugar and wheat flour continued to rise, while Zanzibar President Hussein Mwinyi called on traders in his country not to stock up on basic commodities.

Meanwhile, according to the African Development Bank, the growth rate in East Africa has fallen to 0.7% in 2020, and East African GDP growth is expected to be 3%.

Kenya is expected to grow by 5.9% in 2022 from 5% in 2021, but public debt has risen and the country is now at significant risk of debt distress as defined by the International Monetary Fund.

In Tanzania, the African Development Bank expects GDP growth of 5.8% this year, due to the improved performance of the tourism sector and the reopening of trade lanes; increases in energy and fuel prices are expected to continue, bringing overall inflation to 3.4% this year.

In Uganda, the African Development Bank says the economic outlook is difficult, and the budget deficit will remain at 6% this year, driven by the need to invest in infrastructure including roads, electricity and water.

In Rwanda, growth is expected to rebound this year, supported by high infrastructure spending at Bugesera International Airport and the recovery of the tourism sector as the effects of the pandemic dissipate, and the implementation of the African Continental Free Trade Area (AfCFTA) is expected to boost intra-regional trade, which will support growth, especially if Rwanda increased its share of intra-regional exports.

In Burundi, economic growth is expected to reach 2.1% in 2022, and the African Development Bank said: "Inflation will fall to 3.2% in 2022."

On the economic outlook for the Democratic Republic of the Congo, GDP is expected to grow by 4.5%, driven by higher prices for key minerals such as copper, and a recovery in both consumption and investment. The Bank said that pursuing fiscal and monetary reforms should help reduce inflation to an average of 11.7% during 2021/22.