Uganda's annual inflation rises to 14.9 pct

By Jack Kimball, KAMPALA (Reuters), 28/11/2008

Uganda's annual inflation rose to 14.9 percent in November from 14.5 percent last month due to higher food costs, the government said on Friday.

The landlocked east African country's economy has been growing strongly, but like all its regional neighbours it has suffered inflationary pressures from high food and fuel prices.

Uganda is a prime example of sub-Saharan nations that have grown strongly since the 1990s, luring investors to a continent seen as the final frontier for emerging markets. But the global financial downturn may be starting to bite here too.

"The annual headline inflation rate for the year ending November 2008 went up to 14.9 percent from 14.5 percent in October," the Uganda Bureau of Statistics said.

Food inflation rose to 30.3 percent in November from 29.2 percent the previous month, it said in a statement.

Core inflation, which excludes food crop items, fuel, electricity and metered water, inched up to 13.2 percent in November from 13.1 percent. Uganda's inflation is measured by surveys taken in the first two weeks of each month.

The International Monetary Fund (IMF) said last month that it expected the country's core inflation to fall to 7 percent by June next year, and to 5 percent by August 2009.

It said the fundamentals of the economy remained strong in the medium term, and in a report it forecast growth dipping to a "still healthy" 7.0-7.5 percent in 2008/09 (July-June).

In addition to high inflation, it warned that reduced exports and foreign investment would also put the brakes on gross domestic product growth that was 8.9 percent in 2007/08.

On Tuesday, Uganda's central bank said the current account deficit doubled in September to $166.3 million, versus the same period last year, driven by private sector demand for imports.

The overall balance of payments surplus fell to just $2.3 million in September from $102.7 million in the same month last year due to the current account deterioration, the bank said.

Uganda, Africa's second biggest coffee grower after Ethiopia, has been reducing its dependence on foreign donors. Finance Minister Ezra Suruma said in June that development partners would fund just 30 percent of spending in 2008/09, down from 38.7 percent in 2007/08 and 42 percent the year before.