Kigali — The Economist Intelligence Unit has revised its Rwanda inflation forecasts for 2008 by about two percentage points to 9.5%, RNA reports.

The economic research and advisory group that also publishes the Economist magazine estimated last year that the inflation rate for 2008 would be at 7.5% and 7.3% in 2009. The group now says in its latest country report for Rwanda that inflation will peak at 9.5% in 2008 and later drop to 8% in 2009.

Domestic factors including the level of food production and the monetary authorities' effectiveness in neutralising the impact of rising government spending could worsen the inflationary outlook further, the report says.

It adds: "Oil prices are forecast to remain high over the forecast period and domestic agricultural output will rise barely, if at all, remaining highly vulnerable to changing weather patterns."

Rwanda's vulnerability to increasing oil prices was also compounded by the recent post election crisis in Kenya that forced government to negotiate for a transfer of its imports route to Tanzania.

Oil products had to be brought in from Tanzanian port of Dar es Salaam which increased transport costs. With international pump prices running high, a liter of diesel and petrol in Rwanda now costs Rwf 924 (about 1.5 dollars).

"Although monetary policy implementation is improving steadily, it will not be enough to contain inflationary pressures effectively, and average annual inflation is forecast to rise to 9.5% in 2008, before easing slightly, to 8%, in 2009", the experts said.

"We have revised the Rwandan inflation forecast upwards since the start of 2008 for three main reasons - rising global food prices, rising international oil prices and, to a lesser extent, the impact of the crisis in Kenya at the start of the year", Mr. Joseph Lake, the Editor with the Economist - Africa - told RNA from London.

Government has seen inflation within these ranges but notes that growth rates will cover up the changes. It is estimated economic growth could reach 7 percent in 2008, on the back of strong service and agricultural sector expansion.

"Seven percent real GDP growth (for 2008), (in) 2009 we are expecting 7.5 and 8 percent in 2010," Finance Minister James Musoni told Reuters in June on the sidelines of the World Economic Forum for Africa meeting in South Africa.

The authorities have also maintained that the global food crisis has not affected Rwanda - instead urging farmers to take advantage of the high prices by selling their produce market prices.