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Uganda households are vulnerable to food insecurity - World Bank

A mother with her children in Karamoja

A mother with her children in Karamoja

The 19th edition of the World Bank Uganda economic update has indicated that most Ugandans face a risk of food shortage.

The report blamed the possibility of shortages in constant food supply to the Ugandan population spread out around the country on work stoppages at the start of the financial year 2021/2022.

The report comes at a time when many people in the Karamoja region are starving to death, with the food shortage in the area making headlines.

In early June 2021. President Yoweri Museveni imposed a 42-day nationalwide lockdown to tame the spread of the pandemic across the country. Among the restrictions announced by Museveni to tame the spread of the Covid-19 pandemic were: the closure of schools and other institutions of learning, suspension of weekly market days, suspension of inter-district travels, closure of bars, etc.

The report noted that “In addition to the 11-percentage point fall in employment between the surveys conducted in March/April 2021 and October/November 2021 was mainly attributed to Covid-19 restrictions.

From the survey, over 50 per cent of the households reported an increase in food insecurity, with poor weather conditions also adding to the factors driving the situation worse.”

The report further noted that although some social protection programmes had been put in place, the social programmes remained limited and had only reached 13 per cent of households in October/November 2021.

According to the economic update, the rising commodity prices especially for food and fuel, and the overall increase in the costs of living have worsened conditions for many households since these challenges were not proportionate to the income of the population.

In a July 2022 Monetary Policy statement by the Bank of Uganda, the prices of goods and services continued to rise, largely influenced by external cost pressure stemming from higher global food and energy prices, persistent global production and distribution challenges, and the rising domestic food crop prices due to prolonged dry weather conditions on food harvests across the country.

The statement added, “While the inflationary pressure is likely to be temporary, the Monetary Policy Committee (MPC) assessed that a markedly higher policy rate is needed to stabilize inflation around the target. Accordingly, the MPC raised the central bank rate to 8.5 per cent...”

The World Bank noted that monetary tightening will likely raise the credit risk of the banks. Credit risk is when there are chances of bank borrowers failing to meet their obligations per the terms agreed with the bank.

Improper credit risk management reduces the profitability of banks, affects the quality of their assets, and increases loan losses and non-performing loans, which may eventually lead to financial distress. To attain a more inclusive and resilient recovery, the World Bank recommends that more attention is directed toward four different sectors.

It recommends the acceleration of the vaccination efforts to avoid the resurgence of the pandemic, and the adoption of targeted interventions to support the vulnerable while accelerating the building of the foundation for a shock-responsive social protection system.

This system includes a national social register to ensure quick and efficient reach-out to target populations once shocks hit, a stronger digital payment platform for efficient and transparent distribution of support, and a disaster-risk financing strategy.

It calls on the government to efficiently manage its debt without resorting to the domestic, where local banks invest in treasury bills and bonds instead of lending to the private sector. The bank suggests a reduction in domestic arrears, maximizing concessional financing, rationalizing expenditure, and closely monitoring all sources of fiscal risks.

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