Ugandan Inflation Drops To 6.8%

Uganda’s inflation rate dropped marginally to 6.8 per cent this month compared to 8.1 per cent in October, driven by lower food prices.

mangoStatistics from the Uganda National Bureau of Statistics (UNBS) show that it was driven by a reduction in prices of matooke (plantains), Irish potatoes, cassava, sweet bananas, oranges, tangerines, cabbages, tomatoes…. this is attributed to increased supplies of these items on the market and was the major cause of the drop in the overall cost of living.

Consumer prices fell 0.7 percent during November, helping to hold the year-on-year inflation rate to 6.8 percent, down from 8.1 percent a month earlier. Core inflation, which excludes both food and fuel costs, fell to 7.0 percent from 7.2 percent in October.

“The annual food inflation rate for the year ending November decreased to 8.1 percent compared to the 10.9 percent recorded during the year ended October,” the statistics office said in a statement.

Food prices eased 2.3 percent during the month. Food carries a 27.2 percent weighting in the consumer price index.

Dr Chris Mukiza, the Director Macroeconomics Statistics at Ubos, while releasing the monthly inflation update, says consumers were not buying as much of the goods available in the market, explaining the slowdown in inflation.

On why there was reduced demand in the market, Dr Mukiza highlighted that government had not spent as much in the second quarter and that there was reduced money in circulation.

The cost at which factories produce also reduced has been reducing, keeping the prices of their products lower. The Uganda Shilling has been strengthening against the Dollar with analysts relating this to low demand as customers were not spending that much on imported goods. However, as the Christmas season begins to pick up, then prices are likely to increase as has been the trend. In December, transport fares are hiked; food prices and imported goods like clothes tend to increase.

This, according to Dr Mukiza would lead to increased demand, which is likely to feed into the overall inflation outlook. He however points out that there is enough food in the market but then speculators, who tend to exploit the demand in December, could increase the prices.

The inflation data will be welcome news to policymakers in Kampala, who have been trying to slow potentially destabilising price rises without stalling the strong growth that underpins the legitimacy of the ruling NRM party.

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