Mutebile Predicts Tough Times Ahead As Inflation Rises To 19%

1966 Views Kampala, Uganda

In short
Emmanuel Tumusiime Mutebile, the Bank of Uganda Governor says it will take up to two years to address the runaway inflation bedeviling the country today.

Emmanuel Tumusiime Mutebile, the Bank of Uganda Governor says it will take up to two years to address the runaway inflation bedeviling the country today.

Delivering his monthly monetary policy statement today, Mutebile said headline inflation for the month of July rose to 18.7 percent from 15.7 percent in June, while core inflation which was at 12.2 percent in June shot to 15.6 percent in July.

Headline inflation measures the percentage increase in the prices of over 270 goods known as Commodity Price Index while core inflation is the measurement of all goods in the basket minus food and fuel.

Mutebile said based on the volatile inflationary situation, it is only possible to bring especially core inflation to the five percent target within 12 and 24 months.

The governor attributed the rise in headline inflation to sharp increase in food prices, in particular prices of maize flour, sugar and sweet potatoes.

He said the central bank expects headline inflation to fall back to between eight and 10 percent by July 2012 and to around five percent by the middle of 2013.

Mutebile noted that in July food inflation stood at a high of 40.6 percent and attributed it to supply-side shocks, both within Uganda and in the neighboring countries, which have reduced the availability of food on the markets.

He predicted that over the next few months food prices in general should begin to decline as more food becomes available, although the rate at which the prices will fall is uncertain due to what he called very difficult regional food situation.

The governor said the central bank will continue to follow a strict monetary stance using the Central Bank Rate (CBR) as the main monetary policy instrument. This is aimed at controlling inter-bank lending rates in order to reduce credit to their customers.

As a result, Mutebile announced that the Bank of Uganda raised the CBR from 13 percent in July to 14 percent in August. The governor said the increase in the CBR is expected to provide some support for the nominal exchange rate, which affects the domestic prices of imported goods.

Mutebile warned that should the inflationary situation get worse, the central bank will tighten its monetary policy further.

Meanwhile, the Director of Research, Jacob Opolot said there has been a 43 percent growth in private sector credit as well as personal and household loans.

This was despite the fact that the central bank began using the central bank rate in July.

Opolot said Uganda still continues to register a trade imbalance whereby in July her import bill was at 409 million dollars compared to 225 million dollars in exports, a deficit of 184 million dollars.


About the author

David Rupiny
In his own words, David Rupiny says, "I am literally a self-trained journalist with over 12 years of experience. Add the formative, student days then I can trace my journalism roots to 1988 when as a fresher in Ordinary Level I used to report for The Giraffe News at St Aloysius College Nyapea in northern Uganda.

In addition to URN for which I have worked for five years now, I have had stints at Radio Paidha, Radio Pacis, Nile FM and KFM. I have also contributed stories for The Crusader, The New Vision and The Monitor. I have also been a contributor for international news organisations like the BBC and Institute for War and Peace Reporting. I am also a local stringer for Radio Netherlands Worldwide.

I am also a media entrepreneur. I founded The West Niler newspaper and now runs Rainbow Media Corporation (Rainbow Radio 88.2 FM in Nebbi). My areas of interest are conflict and peacebuilding, business, climate change, health and children and young people, among others."