Low food supply blamed for inflation

In Summary

Still growing. The inflation rate has been predicted to grow even higher.

KAMPALA. Persistent depreciation of the Shilling and a reduction in food supply has contributed to a rise in Uganda’s annual inflation headline rate.
Uganda Bureau of Statistics said last week, the rise in the inflation rate, which is the highest in nine months, reflects the increasing costs of goods and services the public is incurring amid constant income.
Releasing the Consumer Price Index (CPI) at Statistics House last week, the director macroeconomics at Uganda Bureau of Statistics (Ubos), Dr Chris N. Mukiza said: “There was a rise in annual inflation to 2.2 per cent in April 2015 compared to the deflation of 2.2 per cent recorded during the year ended March 2015. The main driver was an increase in prices of some staple foods in most centres.”
Dr Mukiza added: “In addition, the annual non-food inflation registered 4.5 per cent increase for the year ending April 2015 compared to 4.1 per cent recorded for the year ended March 2015.”
On the side of annual core inflation, which excludes metered water, food crops and fuel from the consumer price index basket, Ubos says it increased to 4.6 per cent in the last 12 months, which ended April 30, up from 3.7 per cent recorded for the year ended March 2015.
Dr Mukiza said the increase in Uganda’s core inflation, which government uses to control the rate of the country’s inflation at five per cent, was as a result of the exchange rate depreciation (Shilling depreciation against the US dollar), which is making the cost of manufactured and imported goods more expensive.
“The Uganda Shilling has continued to depreciate against the US dollar, this has seen increases in the price of imported goods into the country,” he said.
Statistics from Bank of Uganda show that by March 2015, the Uganda Shilling had depreciated by 16.5 per cent against the US dollar on year-on-year basis to an average of Shs2951.74 per US dollar.
With the harvesting seasons still far and with no signs of the Shilling appreciating against the US dollar in the near future, Dr Mukiza expressed fear that inflation in the coming months is likely to be higher.
“I don’t want to speculate at this moment, but the inflation rate is likely to be higher than it is due to seasonal factors and a weak shilling. A combination of high food prices, clothing, education and other services is contributing to a rise inflation levels in Uganda,” he said.
During the period under review, the annual energy fuel and utility (EFU) rose to 1.4 per cent for the year ending April 2015 compared to 0.8 per cent registered in March 2015.
Statistics shows that the annual inflation for goods increased to 3.4 per cent in April 2015 compared to 2.4 per cent recorded for the year ended March 2015.
Following a similar path was the annual inflation in services, registering a 5.6 per cent in April 2015 compared to 4.8 per cent recorded in the year ended March 2015.

3.4%
The current inflation headline rate in Uganda.

moketch@ug.nationmedia.com