INFLATION HITS 21%


Ugandans woke up to shock news when the latest data of the Uganda Bureau of Statistics and from the Bank of  Uganda emerged overnight, suggesting the annual inflation rate had risen to 21.4 percent in August.

Alongside this piece of bad news came yet more bad news that banks were raising interest rates for commercial loans while alongside the value of the Uganda Shilling continued to move lower.

While largely, though not totally, influenced by external events, the Ugandan economy is facing its biggest challenge for over 20 years now and consumer confidence is said to have dropped sharply too.

Across the region inflation figures were already in the deep double digits in July, getting worse in all countries except Rwanda, which seems more insulated to these events, probably as a result of governments efforts to control spending, which for instance in Kenyas public sector seems rampant while the gaps between spending on imports and earnings from exports in Uganda and Tanzania is widening.

Adding to the woes of the Ugandan government are pay disputes with teachers and a range of other public servants, whose often low pay has been eroded over the past months by galloping inflation.

Economists are divided though on the best course of action of how to combat inflation without hurting the economy too much by central bank measures of mopping up excess liquidity, while equally divided over demands to introduce subsidies for key ingredients of daily life to lower the cost of living for the wananchi.

The announcement of Tullow Oil over uncertain timeframes to commence oil production too has rattled the market as an early production start was seen by many analysts as an almost guarantee to get the economic house back into order. According to political observers the companys statement could not have been timed worse if it had been designed to cause yet more problems and is likely to trigger another standoff with government just days before Tullows sale of a major stake to Total of France and the CONNC of China was to be completed.

Compiled by Jackie
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