Posted on January, 5, 2017 at 09:21 am
By MARTIN LUTHER OKETCH
Kampala.
Prices of goods and services were much higher in 2016 compared to 2015, resulting into an increase in both the annual headline and annual core inflation.
In its inflation figures for the calendar 2016 on December 30, Uganda Bureau of Statistics (Ubos) said the annual average headline inflation for the calendar year 2016 increased to 5.5 per cent compared to the 5.4 per cent recorded in for the calendar year 2015.
The director macroeconomic statistics Ubos, Dr Chris N. Mukiza, revealed that the annual core inflation registered 6 per cent for the calendar year 2016 compared to 5.4 per cent for the year 2015.
“Similarly, annual average Energy Fuel and Utilities increased to 3.9 per cent for the calendar year 2016 compared to 3.5 per cent registered for 2015. However, annual average food crops and related items dropped to 3.1 per cent for the calendar year 2016 compared to 6.7 per cent rise recorded for 2015,” he said.
The headline inflation includes all goods and services used in the calculation of inflation in given period of time, while the core inflation excludes food crops, metered water and energy (fuel) from the Consumer Price Index.
Dr Mukiza explained that the rise in Uganda’s inflation rate in 2016 was as result of education services due to high school fees charges, high transport cost and depreciation of the shilling against the US dollar.
Inflation is an increase in prices, which affects the economy by reducing the purchasing power of consumers, causing companies to earn less revenue.
Inflation also increases the rate of unemployment because it leads rising wage demand which at times companies are not ready to pay.
High inflation rate also has a regressive effect on lower-income families and older people in society.
This happens when prices for food and domestic utilities such as water and electricity rise at a rapid rate. It also affects both high and low income earners inform of a fall in real income.
The executive director Private Foundation Uganda, Mr Gideon Badagawa, in an interview with Daily Monitor last week, said Uganda’s inflation rate is expected to keep rising because of the droughts being experienced in most parts of the country.
“We shall continue experiencing high food prices in the market than they are right now in the next six months because there is no harvest being done due to bad weather that has affected crop production in parts of the country,” he said.
Mr Badagawa said high inflation affects the country’s economic performance auguring that if a country has a much higher rate of inflation than others for a considerable period of time, this will make its exports less price competitive in world markets.
He said to mitigate the effect of bad weather in agricultural products, government needs to develop sound irrigation systems such that farmers do not have to depend on rainfall for crop production.
Source: Daily Monitor