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Inflation Falls Although Future Looks Uncertain

The prices of goods and services fell further in the month of June as an increase in food harvests brought relief to the numbers struggling to get by.

Figures from the Uganda Bureau of Statistics note that core inflation, the measure of the changes in prices of goods and services less food crops and electricity, dropped to 2.7 per cent in June from 3.3 per cent registered in May. Headline inflation, which measures general changes in the prices of goods and services, dropped to 4.9 per cent in the year to June, from 5.4 per cent May. Bank of Uganda’s inflation target is 5 per cent.

The fall in inflation “was mainly due to a significant decrease in prices of food crops during the month of June 2014,” Ubos noted in a statement. The prices of Irish potatoes, pineapples, sweet potatoes, plantains, milk, and sugar dropped.

However, a monthly increase in the non-food category prices was recorded, mainly with firewood, education charges, beverages and tobacco. Prices are anticipated to go up a little more as vendors try to pass on the new taxes that were proposed in the recent budget to the consumers. MTN and Airtel Uganda announced on Wednesday that they would raise their mobile money charges on withdrawals to cover the tax.

“Due to a new 10 per cent excise duty on mobile money withdrawal fees, we are adjusting our rates from 1st August,” said MTN in an SMS to the users.

The shilling continued to depreciate against the dollar after the United States announced various aid cuts because of Uganda’s recent legislations that have been described as an abuse to human rights.

The value of the shilling to the dollar broke the 2,600 barrier, with analysts predicting a depreciating trend for the next couple of weeks. Bank of Uganda has shifted its monetary policy announcements, which mainly reflect inflationary trends, to a schedule of every two month from monthly.

“The less frequent policy adjustments will further support the planning process of businesses to the benefit of the economy and better align Uganda’s monetary policy framework with those of the other EAC partner states,” said a BOU statement last week.

According to Stephen Kaboyo, the managing director of Alpha Capital, the new schedule of announcing the monetary policy statement “gives BOU more room to interrogate the key economic variables in shaping its policy, gives it more merit and further improves transparency.”

Source : The Observer

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