Uganda’s annual inflation closes 2023 at 4.6 percent

Uganda registered a lower headline inflation of 4.6 percent for the year 2023 compared to 7.2 percent recorded during 2022. 
The decline in the calendar inflation means that though the prices of goods and services are still rising, they were not as high as they were in the past calendar years, which made people’s life much harder due to the high cost of commodities.

Low inflation enables consumers to have more money to buy goods and services and save to a certain extent. It encourages investment in the economy and the economy benefits and grows.
Speaking about the decline in the calendar year 2023, director macroeconomic statistics Uganda Bureau of Statistics, Ms Alizik Kaudha Lubega said: “This was mainly due to the annual average core inflation for calendar year 2023 recorded at 4.0 percent compared to 6.0 percent during the calendar year ended 2022.” 
Ms Lubega said prices of goods and services are still rising but at a slower pace compared to the past years. 

Value of money
Currently, the value of money has been eroded as there has been a general increase in prices of necessities such as food, transport and energy. But incomes have not risen as much as prices. As a result, consumers have less purchasing power than before.

On the annual basis that is the annual as measured by the Consumer Price Index for Uganda for the 12 months from December 2022 to December 2023, Ms Lubega said Uganda registered annual headline inflation of 2.6 percent, the same level it was registered in the year ended November 2023. 

However, the annual core inflation increased to 2.3 percent in the year ending December 2023 from 2.0 percent registered in the year ended November 2023.

Ms Lubega said: “The drivers for Annual Core Inflation were annual services inflation that rose to December from 3.7 percent from 2.8 percent in November 2023, with passenger transport by taxi and hired car inflation rising to 4.3 percent in December from minus 4.4 percent in November 2023, passenger transport by air registered a fall of minus 3.1 percent in December from minus 5.1 percent in November 2023.”

During the period, local gin (Waragi Crude) price, it rose to 7.5 percent in December from minus 3.8 percent in November 2023.

During the period, the annual other goods inflation increased at a slower rate of 1.2 percent in the year ending December 2023 compared to 1.4 percent in November 2023. 

Ms Lubega said the main drivers for Annual Other Goods Inflation; Motorcycle Price Changes that registered a price increase of 36.2 percent in December 2023 from minus7.2% in November 2023. 

“Rice price changes registered a rise of 1.3 percent in December from -1.7 in November 2023, smoked tilapia price: increased by 11.0 percent in December up from 4.2 percent in November 2023,” she said.

Ms Lubega said the annual food crops and related items inflation increased at a slower rate of 2.5 percent in the year ending December 2023 compared to 6.4 percent registered in the year ended November 2023.

“This was attributed to an increase in the prices of green cabbage by 10.3 percent in December compared to minus 3.3 percent registered in November 2023. Dry bean prices increased by 13.4 percent compared to 11.4 percent.

 Watermelon prices increased by 19.4 percent in December compared to minus 0.1 percent recorded in the year ended November, and carrot prices increased by 28.8 percent in December compared to 18.0 percent registered in the year ended November 2023,” she said. 

The CPI figures indicate that Annual Energy Fuel Utilities  inflation increased to 6.4 percent in the year ending December 2023 compared to 4.3 percent registered in November. 

This was due to an increase in the price of charcoal by 24.7 percent in December compared to 16.7 percent in November, petrol prices increased by 0.6 percent in December compared to minus 3.9 percent in November 2023.  Diesel price changes to minus 9.1percent in December compared to minus 9.3 percent in November 2023 

The International Monetary Fund (IMF) said in October 2023 that inflation is coming down in sub-Saharan Africa. Having peaked in March 2023 at almost 10 percent (y/y), median inflation in sub-Saharan Africa has dropped by 3 percentage points, bringing the latest estimate to 7 percent as of July, 2023.

However, the IMF said still, some storm clouds remain stating that although inflation is trending down for more than 40 percent of the region, rates are still above pre-pandemic levels. 

It pointed out that for countries where expectations are not well-anchored, the longer elevated inflation persists the greater the prospect of spiraling second-round effects—requiring monetary authorities to tighten even more aggressively, and potentially adding an extra hurdle for fiscal authorities who may face added public wage demands. 

Speaking during the release of the Sub Saharan Africa Regional Economic Outlook director African Department of the IMF Dr Abebe Aemro Selassie, said policymakers face some of the most daunting policy challenges in the world.
Dr Abebe said they must continue maintainnig macroeconomic stability amid limited resources and development needs as they face frequent shocks and fragility. Against this backdrop, a strong focus on some interrelated policy priorities can help.

“First, addressing inflation in countries with elevated and rising inflation. Further tightening might be warranted. Countries where inflation is both falling and on track to meet their target could pause monetary policy tightening. This matters, of course, because of the hugely adverse effect that high inflation has in eroding the incomes of the poorest people in society,” he said.

Second, he said reducing debt vulnerabilities while creating space for development spending, pointing out that this requires a delicate balance between raising domestic revenues and reforms to foster growth.

“Allowing the exchange rate to depreciate where needed. Avoiding depreciation pressures at the cost of exhausting scarce international reserves and eroding competitiveness often ends up causing more challenges later on,” he said.