Why ‘low inflation’ doesn’t mean lower costs

Uganda’s economy is growing. The numbers say so. GDP is expanding at about 5% to 6%, inflation is back in single digits, and the shilling has held relatively steady compared to many regional currencies. On paper, things look stable.

But step into a market, board a taxi, or talk to a small business owner, and a different story emerges. Prices are still high, incomes are stretched, and many Ugandans are asking a simple question: If the economy is improving, why does life still feel expensive?

You may hear that inflation is under control, but the average Ugandan will tell you something different. A simple trip to the market tells the real story.

A tray of eggs that once cost UGX 10,000 now goes for about UGX 13,000 or more. A basic lunch in Kampala has moved from UGX 5,000 to around UGX 8,000. Transport fares shift almost weekly depending on fuel prices. So, what’s going on?

Inflation measures how fast prices are rising, not whether they are falling. Prices went up sharply in recent years, and even though the rate of increase has slowed, the prices themselves have stayed high.

Fuel is at the center of it all. When fuel prices rise, transport costs go up, and that affects everything from food to construction. A boda boda rider pays more for fuel, charges more, and that cost spreads across the economy. So even with “low inflation,” life doesn’t feel cheaper.

While prices have climbed, incomes have not kept pace.

For many Ugandans, especially those in informal work, earnings have barely changed. If your salary or daily income has stayed the same but your expenses have increased, then in reality, you are worse off.

Take a trader in Owino. The cost of buying stock has gone up due to transport and supplier prices. But customers are also struggling, so prices cannot rise too much. The result? Smaller profits and more pressure.

At home, families are adjusting quietly. Cutting non-essential spending. Reducing meal options. Delaying purchases. This is the silent squeeze. It does not always show up in statistics, but it is deeply felt.

Many people don’t see taxes directly, but they feel them every day. When fuel taxes increase, transport becomes more expensive. That pushes up the cost of goods in markets and shops. Taxes on sugar, plastics, and imports also add to everyday prices.

That bottle of soda, that bag of cement, that kilo of sugar, all carry embedded taxes. By the time goods reach the consumer, the cost has already been passed down the chain.

As government pushes to raise more revenue, the challenge is clear: how do you tax more without making life harder?

For businesses, this is a period of cautious survival. There are opportunities. Oil and gas is advancing. Agriculture remains strong. Manufacturing is growing gradually. But many businesses are not expanding. They are holding on.

A manufacturer today faces higher fuel costs, expensive electricity, and rising input prices. At the same time, customers are cutting spending. This creates a tough balance between pricing and demand. Add high interest rates, and borrowing to grow becomes even harder. For many businesses, the mindset is simple: survive first, grow later.

A large part of Uganda’s economy runs informally. From boda boda riders to market vendors to small farmers, millions operate outside formal systems. This sector keeps the economy moving, but it also faces challenges.

It is harder for government to collect taxes from this group, and those within it often lack access to credit, insurance, and support systems.

Efforts to formalize the economy are increasing, especially through digital systems. But people will only formalize if they see value in doing so.

Uganda’s economic outlook remains positive. Growth is expected to continue, supported by oil developments and regional trade. But growth alone is not enough. The real question is whether that growth will improve everyday life.

For that to happen, three things must align. Prices must stabilize. Incomes must rise. And tax policies must support both households and businesses.

Our economy is not in crisis, but it is under pressure. The numbers show progress, but the market shows strain. Until the cost of living eases and incomes catch up, many Ugandans will continue to feel left behind because in the end, economic success should not just be measured. It should be felt.

From a policy and practical perspective, the way forward requires balance. Government must continue strengthening domestic revenue, but with careful consideration of its impact on prices and consumption. For businesses, the focus should be on efficiency, cost control, and diversification to withstand current pressures. Households, on the other hand, need to adopt more disciplined financial planning, prioritizing essentials and building resilience where possible. 

The writer is a chartered Accountant and a Chartered Tax Advisor.