Commodity prices to shoot up as inflation rises to 7.2%

Kampala- The rise in food prices and the continuous depreciation of the shilling has pushed up the rate of annual headline inflation rate from 4.8 per cent to 7.2 per cent signifying that the cost of living in the country is going up.

This is the highest inflation recorded in Uganda since October 2013 when it stood at 8.1 per cent.

The rising inflation rate means that the general public will now need more money in their pockets to meet their daily expenditure on goods and services.

Uganda Bureau of Statistics said last week that the annual food crop inflation increased to 10.2 per cent for the year ending September 2015 compared to 1.8 per cent that was registered during the year ended August 2015.

The director macroeconomic Uganda Bureau of Statistics, Dr Chris N. Mukiza, said food crop items were expensive in September due to off harvesting season that has led to a reduction in food supply on the market.
“When there is reduction in food supply an the market, prices of these commodities rise hence leading to increase in the country’s inflation levels,” he said.

Similarly, the Consumer Price Index by UBOS reveals that Uganda’s annual core inflation, which the central bank uses to control the country’s inflation rate at 5 per cent, also went up to 6.7 per cent for the year ended September 2015 compared to 5.5 per cent that was registered in the year ended August 2015.

Dr Mukiza said the rise in annual core inflation is as a result of the depreciation of the shilling against the US dollar that continues to stay on and the increase in the education services charges.

“There is always a lagged impact in the exchange rate depreciation, in the inflation rate the one we are witnessing is the impact of Shs3,500 depreciation some time ago; the impact of current exchange rate of Shs3,700 per US dollar is going to be felt later,” he said.
Though the two government authorities - the ministry of Finance, Planning and Economic Development and the Bank of Uganda are administering tight policy stance, the risk of high inflation remains visible being an election year, among other factors fuelling higher inflation levels in the country.
The rise in the annual core inflation rate is likely to force the Bank of Uganda to raise the Central Bank Rate in its next Monetary Policy Committee meeting this month.
Uganda had higher inflation crisis in 2011 with the annual headline inflation hitting 30.5 in October forcing the Bank of Uganda to raise Central Bank Rate then to 23 per cent to curb the run away inflation.

The Uganda Bureau of Statistics figures further show that there has been reduction in the annual energy, fuel and utility inflation registering a 3.8 per cent for the year ending September, compared to 3.9 per cent registered in the previous year.

Other macroeconomic developments in Uganda’s economy show that the annual inflation for other goods rose to 6.4 per cent in September compared to the 5.1 per cent recorded during the year ended August 2015 implying that there is high price pressures in the economy to date.

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