Drought pushes up inflation to 7.3 per cent

What you need to know:

Uganda has been grappling with a long dry spell for more than four months since March, interfering with the planting season since agriculture is rain fed.

Headline Inflation Trend
Month Rate (%)
January 4.9
February 3.5
March 4
April 3.6
May 3.4
June 3.6
July 5.1
August 7.3

The long drought that spanned over four months severely hurt agricultural productivity in the country, driving up food prices by 2.2 percentage points in August, the Uganda Bureau of Statistics has said.

The Consumer Price Index (CPI), the official measure of inflation released yesterday, indicate that Uganda’s annual headline inflation surged to 7.3 per cent in August, up from the 5.1 per cent posted in July.

According to Mr Chris Ndatira Mukiza, the Ubos director in charge of macroeconomic statistics, decreased supplies to markets due to effects of the long dry spell resulted into an increase in prices for bananas, sweet potatoes, irish potatoes, oranges, tomatoes, cabbage, beans and milk.

Reduced food production drove up food crops inflation to 13 per cent, from the -0.3 per cent recorded in July.

Price increases were also registered for unmetered water, firewood, clothing, mobile phone tariffs, meals in restaurants, alcoholic beverages and household textiles and furniture.

Inflation is the general change in the prices of commodities and services over a certain period of time.

Impact
The rise in inflation means that a consumer now needs more money to pay for a similar basket of goods and services when compared to the same period last year.

Uganda has been struggling with a long dry spell for more than four months since March, interfering with the planting season since agriculture is rain fed.

A reduction in prices was, however, recorded for sweet bananas, pineapples, carrots, onions, green pepper and bitter berries.

Meanwhile, core inflation, which excludes food crops, fuel, electricity and metered water that are volatile to price change, also increased to 6.6 per cent from a revised 6.4 per cent in July due to price increases for clothing, unmetered water, mobile phone tariffs and household textiles and furniture.

Dr Nixon Kamukakama, an economist said the upswing in food prices is expected to carry on due to delayed onset of rains which had delayed planting, thus reduced agricultural production.

The surge in headline inflation to 7.3 per cent and core inflation to 6.6 per cent from 6.4 per cent posted in July is above Bank of Uganda’s target of 5 per cent and above the 5.5 per cent range that Citibank Africa economists David Cowan predicted in his report titled “Uganda: The economy regains momentum into 2014”.

Crested Stocks Securities had also predicted in its weekly money market report for August 29 that inflation would remain stable, at about 5.3 per cent in August.

The brokerage firm, however, said inflationary pressures remain due to a mismatch between the rainy season and the beginning of the planting, with the consequence of a decrease in crops supply.

Increasing food prices are expected to exert more pressure on the already weak consumer demand in the country.