INFLATION RUNS AWAY WITH 28.3 PERCENT IN SEPTEMBER
Ugandans will wake up today to the shock news of a 28.3 percent inflation figure, published yesterday afternoon through the relevant departments of the Bank of Uganda and the Uganda National Bureau of Statistics. Last months figure, now looking relatively modest, was 21.4 percent and it was generally expected that the doubling of phone charges might push the annualized inflation to 25 percent but not to over 28 percent. Food prices, the key item for ordinary Ugandans, when taken as a standalone figure and not in a weighed basket of goods and services rose in fact by 50 percent compared with a year ago, pushing the absolute limits now for making salaries last through a month, feeding families, paying utilities bills and affording transport to work for millions of wananchi.
Economic observers and analysts feel that this latest data alone is almost bound to drive inflation even faster, as traders and businesses will try to push the use of hard currencies for their local transactions, likely to cause a further devaluation of the Uganda Shilling, similar to the neighbouring Kenya Shilling last week falling for some time through the psychologically important 100 mark.
Fundamentals are also not in favour of Ugandas economy now as the countrys import bill by far exceeded its export earnings and increased production becoming literally impossible with the ongoing sharp power rationing by monopolist distributer UMEME, which earlier in the week reverted again to a 24 hour no power cycle when independent power producers failed to get paid their contractually agreed subsidies and had to switch off their plants for lack of cash. Earlier in the week did the Uganda National Chamber of Commerce and Industry together with the Private Sector Foundation Uganda held a key dialogue and electricity rationing, together with the weak shilling and runaway inflation were indeed amongst the key issues raised by participants representing the business community.
While there has been no official communiqué issued by government as yet, the bombshell news has overnight certainly rocked the political establishment in the country, as a key component of the NRM government, economic stability, has been put to serious questions now and although parliament is presently in recess it is expected that the opposition will make the most of it and lay blame squarely on governments doorsteps for failing to arrest the slide of the Ugandan currency and halt inflation.
Bank sources have also indicated that they expect a further rise in Bank of Uganda interest rates as one of the available measures to take liquidity out of the market and make borrowing more expensive, thought to be a fine balancing act between combating inflation and strangulating economic activity. Notably was Ugandas Bank of Uganda Governor Prof. Tumusime Mutebile recognized last week as Best African Central Bank Governor for his work, but fighting this battle on behalf of the countrys economy will take very likely all he got to bring the ship back on level keel. The country has not seen such inflation figures since back in 1992/3, i.e. some 19 years ago when this correspondent moved from Kenya to Uganda.
Regular tourism sources were unwilling to neither go on record nor speak off the record when asked to comment late last night, also giving an indication of how the latest release of inflation data has shocked the business community. Watch this space.