Economy Inflation Uganda - Consumers should brace for tougher times ahead as inflation continues to accelerate, threatening to increase price pressures that have already eroded people's spending power. Data released on Friday by the Uganda Bureau of Statistics shows that the Consumer Price Index (CPI) indicates that the annual headline inflation shot from the revised rate of 15.7 per cent in June to 18.7 per cent in July 2011, the highest since February 1993, when it stood at 24.9 per cent. CPI is a measure of the monthly average change in prices that consumers pay for a market basket of goods and services during a selected period.

UBOS Director macro-Economics, Dr Chris Ndatira Mukiza said that rising inflation is mainly driven by skyrocketing food prices attributed to supply shocks due to seasonal effects and increased transport costs.

Food inflation rose to 40.6 per cent in July, up from 33.4 per cent in June 2011.

Dr Mukiza said that while prices for sweet potatoes, cassava, oranges, sweet bananas, bread, maize flour, millet flour and sugar increased during the period, cabbage, tomatoes, onions, beans and fresh milk prices decreased due to increased supplies.

Uganda's inflation is the highest in the region. Kenya's inflation stood at 14.5 in June while Tanzania's was 10.9 when compared to Uganda's 15.7 over the same period.

Recently, Bank of Uganda revised its monetary policy, putting benchmark interbank interest at 13, up from 11 per cent, a move that the Central Bank governor, Mr Emmanuel Tumusiime Mutebile, said sought to mop up excess liquidity from circulation in order to tame the runway inflation.

He noted that the Central Bank would works towards ensuring that it keeps inflation the 5 per cent target.

This volatile economic environment characterised by rising prices and the depreciation of the shilling forced commercial banks to revise their prime lending rates upwards to factor in the increasing costs.

Last week, teachers laid down tools demanding for salary increments to enable them meet the rising cost of living.

Meanwhile, core inflation, which excludes food crops, fuel, electricity and metered water, which are volatile to price changes increased to 15.6 per cent during the period, up from 12.2 per cent June mainly due to the continued depreciation of the shilling against the dollar.

The weak performance of the dollar also impacted imported goods prices especially new clothing, household and personal goods.

Faridah Kulabako and Nicholas Kalungi

The Monitor/30/07/2011