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Inflation rises to 4.9% in November

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By FARIDAH KULABAKO

Posted  Saturday, December 1   2012 at  02:00

In Summary

Experts predict the shilling is likely to weaken further as dollar inflow continues to drop.

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Kampala

Reduced food supplies to markets, coupled with the volatile exchange rate, drove up Uganda’s annual inflation by 0.4 percentage points in November, official statistics released yesterday show. The Consumer Price Index, the official measure of inflation, released by Uganda Bureau of Statistics (Ubos), shows that inflation rose from 4.5 per cent in October to 4.9 per cent in November.

Inflation is the general change in the prices of commodities and services over a certain period of time. Inflation means one needs more money to pay for a similar basket of goods and services when compared to a similar period.

According to Dr Chris Ndatira Mukiza, the director, macroeconomic statistics, Ubos, this was mainly a result of price increases for some food items due supply shocks and a rise in pump prices because of the depreciation of the shilling against major trading currencies especially the dollar.

Weakening shilling
The annual food crop inflation rate rose to 7.5 per cent in November from 4.4 per cent the previous month while the annual energy, fuel and utilities inflation rose during the month to 13.8 per cent from 12.8 per cent.
The shilling has been weakening against the dollar in the last four weeks due to an increase in the demand for dollars against low supply, putting pressure on the price of fuel.

By midday yesterday, the central bank quoted the local unit at Shs2,685, though relatively stronger than the Shs2,700 per dollar on Wednesday this week. The weak shilling saw fuel prices increase with a litre of petrol costing Shs3,750 up from an average of Shs3,600 last week.

It also resulted in price increases for clothes, footware and other imported items, Ubos said.
Mr Faisal Bukenya, the Barclays Bank head of market making, recently said supply had been deeply affected by donor aid cuts over financial scam in the Office of the Prime Minister. “Usually aid comes in dollars hence the cuts are exerting pressure on the shilling”.

Inflation has been on a downward trend since November last year, from 30.4 per cent in October 2011 to 4.5 per cent last month but the trend seems to be reversing.

fkulabako@ug.nationmedia.com