Kampala- The tightening of monetary policy early by the Central Bank and increased food supply has helped Uganda to register reduction in its annual headline inflation rate from 8.4 in December 2015 to 7.6 per cent in January.
Uganda Bureau of Statistics (UBOS) said yesterday the reasons as to why annual headline inflation reduced was a result of annual food crops inflation which decreased to 12.3 per cent for the year ending January 2016, compared to 16.0 per cent recorded for the year ended December 2015.
Releasing the Consumer Price Index at Statistics House yesterday, the director of macroeconomic statistics Uganda Bureau of Statistics, Dr Chris Mukiza, said the Annual Energy, Fuel and Utilities (EFU) inflation, which has been one of the main drivers of the headline inflation in past months decreased to 6.8 per cent for the year ending January 2016 compared to 7.1 per cent recorded in December 2015.
This being an election year, being ready to not have a repeat of what happened in Uganda in 2011 when inflation hit the roof with the highest being registered at 30.5 per cent for the month of October 2011, the Bank of Uganda has very vigilant in the administration of its monetary policy by tightening its policy rate the Central Bank Rate (CBR) at 17 per cent to control inflation and as well stabilising the foreign exchange market.
The Bank of Uganda uses the annual core inflation to control Uganda’s inflation rate at 5 per cent. Dr Mukiza said the annual core inflation went down to 7.1 per cent for the year ending January 2016 compared to 7.6 per cent registered during the year ended December 2015.
“There has been adequacy in the market in terms of food supply because December and January are bumper harvest months and there has also been stability in the foreign exchange market, which in a way implied that the pressure on inflation is receding,” he said.
Dr Mukiza explained that the decrease in core inflation was due to the annual core inflation for other goods and services. “In particular, other goods decreased to 5.8 per cent in January compared to to the 5.9 per cent recorded for the year ended December 2015,” he said.
Dr Mukiza also explained that the decline in inflation does not necessarily mean that prices of goods and services not high or they are not increasing, but the rate at which they are increasing is at decreasing pace.
Uganda Bureau of Statistics collects price of goods and services from eight urban centres in the country to compile Uganda’s inflation figures.
Statistics shows that Masaka registered the highest annual inflation of 11.7 per cent in January 2016 compared to 10.3 per cent it registered in the year ended December 2015.
The second highest centre with the highest annual inflation rate is Jinja with 9.3 per cent for the year ending January 2016, the same rate it registered in December 2015.
The third centre that registered the highest annual inflation was Kampala low income with 9.0 per cent for the year ending January 2016 down from 9.7 per cent registered for the year ended.