Rising food, energy prices push inflation

Some of the prices of some consumer goods in a retail shop in Namuwongo, Kampala, on March 4, 2022. A change in the price of oil and gas products such as petrol has a trickle-down effect on the prices of all other goods. PHOTO/FRANK BAGUMA

What you need to know:

  • The prospect of headline inflation hitting double figures looms large after the Uganda Bureau of Statistics (Ubos) revealed on Friday that the headline CPI rate rose from 6.8 percent in June to 7.9 percent in July.

Ugandan households continue to face strong headwinds from soaring living costs after the latest consumer price index (CPI) figures showed a fresh rise in inflation in July.

The prospect of headline inflation hitting double figures looms large after the Uganda Bureau of Statistics (Ubos) revealed on Friday that the headline CPI rate rose from 6.8 percent in June to 7.9 percent in July.

Record prices for fuel and the soaring cost of food continue to show that inflation, which is broad-based, risks becoming sticky. Households continued to come under growing pressure from rising prices at the fuel pumps as witnessed in the jump of fuel inflation to 56.1 percent from 45.9 percent in June.

The soaring prices of petrol and diesel triggered climbs in annual transport inflation to 4.6 percent from 1.7 percent in June and motorcycle fares inflation, which rose steeply from 3.2 percent in June to 18.8 percent in July.

There were also glaring one-month increases in food staples, providing further empirical evidence that the country is in the grip of an acute inflationary spiral. Matooke inflation (50.7 percent), cassava flour inflation (62.3 percent), and maize flour inflation (56.3 percent) all spiked significantly to breach the 50 percent mark.

Core-price index—which excludes the volatile categories of food and energy—increased to 6.3 percent in July, up from June’s figure of 5.5 percent. Economists say the 0.8 percent or 80 basis points rise in core inflation provides evidence that inflation is becoming entrenched.

As a sign of the [inflationary] times, annual national water charges inflation leapt from 0.0 percent in June to 5.8 percent. The National Water and Sewerage Corporation (NWSC) this month (July) brought in a six percent increment in water tariffs.

The tariffs work out to an increment for government institutions from Shs3,558 a unit and Shs71 per 20 litres to Shs3,771 per unit and Shs75 per 20 litres. The tariff for commercial institutions using under 1,500 litres each month incrementally increased from Shs4,220 to Shs4,473. Entities that consume more than 1,500 litres of water each month now pay Shs3, 575 per unit, up from Shs3,373 in June.

The central bank has previously responded to the current inflationary pressures by rising its policy rate in May and June by one percentage point apiece. While announcing the last hike that put the lending rate at 8.5 per cent, Dr Michael Atingi-Ego—the central bank deputy governor—said a tight monetary policy “is needed to stabilise the inflation around the target.”

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