Uganda inflation rises to 3.7%

Inflation in Uganda is on the rise, with headline inflation currently standing at 3.7%, a significant increase from the previous 2.5% over the last five years. Alan Lwetabe, Director of Investments at Deposit Protection Fund Uganda, attributes this surge to various factors, primarily the movement in energy prices. The global turmoil caused by the conflict between Russia and Ukraine has led to a spike in energy prices worldwide, impacting countries like Uganda, where energy costs are a significant part of households' budgets. In addition to this, the Ugandan government has increased taxes on light manufacturing industries, further contributing to the rising prices. Lwetabe predicts that inflation is likely to continue to increase in the coming months, with the Central Bank of Uganda projecting headline inflation to reach 5.2%. This would be the first time in five years that inflation in Uganda surpasses the central bank's target of 5%. The situation in Uganda is not unique, as other countries in the region, such as Egypt, are also facing inflationary pressures due to global market dynamics. Egypt, for example, recently devalued its currency in response to rising inflation. Despite these challenges, Lwetabe believes that Uganda's central bank is unlikely to raise its policy rate above the current 6.5% in the short term. He suggests that there is room for inflation to stabilize before any significant monetary policy changes are implemented. However, if the global factors driving inflation persist, there may be increased pressure on the central bank to take action in the future. Lwetabe also highlights Egypt's efforts towards market reforms as a positive step in addressing inflationary pressures, despite the challenges the country is currently facing.