Uganda Rules Out Fuel Subsidies as Prices Jump as Much as 19%

(Bloomberg) -- Uganda won’t introduce fuel subsidies even after pump prices spiked following supply disruptions partly caused by Russia’s invasion of Ukraine.

Subsidies and lowering the fuel tax would cost government much-needed revenue and increase the need to borrow, Moses Kaggwa, an acting director at the finance ministry, said Thursday in the capital, Kampala. The Treasury receives 1,450 shillings ($0.41) from every liter of gasoline, he said.

Demand for fuel has rebounded with the reopening of the economy in January after two years of pandemic-driven restrictions. Gasoline prices have jumped 19% this year to an average 5,300 shillings per liter.

Landlocked Uganda, which consumes 6.5 million liters of fuel daily, will allow a competitive environment and only intervene if dealers get “abnormal margins,” Kaggwa said.

The reopening of East Africa’s third-biggest economy will boost growth in the year through June to 4.5% and 6% in 2022-23, partly underpinned by government spending, he said. Uganda is investing in oil infrastructure projects to enable the country to start pumping crude in 2025.

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