Uganda Faces Alarming Fuel Price Surge, Impacts Inflation and Budgets

Pump prices are climbing at a concerning rate across Uganda, with petrol costs alone jumping by approximately 30.3 percent, or Shs1,539 per litre, since February. This upward trend, which has accelerated in recent weeks, is beginning to strain household budgets and increase operational costs for businesses.

In February, a litre of petrol was priced at Shs5,080. By April, this had risen to Shs5,890, marking a 15.9 percent increase. The most significant jump occurred between late April and the present, with prices surging by an additional Shs729 to reach Shs6,619 per litre. This recent spike, Shs329 in just a few days, highlights the market’s volatility.

The rising fuel costs are directly contributing to increased inflation. Annual energy, fuel, and utilities inflation has climbed to 6.1 percent from 4.1 percent in March, continuing a trend that began in February. As energy is a crucial input for transportation, manufacturing, and agriculture, these higher fuel costs are inevitably pushing up the prices of goods and services across the economy.

Global factors, particularly geopolitical tensions in the Middle East and disruptions around the Strait of Hormuz, are primary drivers of these price hikes. Uganda, as a net importer of refined petroleum products, is absorbing increased international crude oil prices, heightened freight charges, and rising insurance premiums. Exchange rate fluctuations further exacerbate import costs.

While the government has implemented measures like centralized procurement through UNOC and utilizing strategic fuel reserves to mitigate the impact, these efforts can only moderate, not eliminate, the effects of global market volatility. The sustained rise in fuel prices poses a significant economic risk, potentially slowing consumer spending, increasing business costs, and complicating inflation management.

Source: Daily Monitor (Uganda)