Kampala — High consumer spending in Uganda is likely to stay high for some months as doubts continue by Uganda Bureau Statistics that the country's inflation rate may not drop to a single digit soon, due to higher commodity food prices, fuel and volatilities in the foreign exchange market.

Soaring food and fuel costs has over the last 12 months exacerbated high cost of living both in the urban and in rural areas underscoring the threat the policy makers faces in stabilising prices in the general economy.

The Consumer Price Index released by Uganda Bureau of Statistics for the month of October indicates that though inflationary pressure in the real economy is slightly easing as the annual headline inflation dropped to 14.5 per cent from 15.2 per cent in September and 15.8 per cent in August 2008 the rate still remains generally high.

Speaking at a news conference held at Statistics House on October 31, the Director of Macroeconomics at Uganda Bureau of Statistics, Mr Matthew Ssewanyanna, said Uganda's inflation rate is still high due to limited supply of food items leading to higher food prices in the market while fuel cost due to uncertainties in the foreign exchange market is also posing a challenge as the country strives to have a single digit inflation soon.

"We expect cost of living to remain high in the country, prices of goods and services are still increasing though in a decreasing manner. People have been forced to spend more on consumer goods in the past 12 months and there is a likelihood that they will continue spending more on these items," he said.

The main inflation diver in Uganda remained food inflation, which has a weight of 27.2 per cent on the total CPI basket. During the month of October food prices went up by 1.8 per cent. Mr Ssewanyana said food prices have remained high due to low supplies as a result seasonal factors (harvesting season ending a number of food items in addition to high demand for food locally and from neigbouring countries.

Food inflation is always said to be beyond monetary policy controls by the central bank, however, in an effort to stabilise volatilities in the foreign exchange market, the Bank of Uganda embarked on daily sells of $300,000 during October as it mops up excess liquidity in the market.

The CPI figures shows that the annual headline inflation rate for the year ending October 2008 dropped to 14.5 per cent while the core inflation which excludes food crop items fuel, electricity and metered water from the CPI basket declined to 13.1 per cent from 13.5 per cent that was registered for the year ended September 2008.

The survey by Uganda Bureau of Statistics shows that although there was a decrease in the prices of petrol, diesel and paraffin in the early stages and mid stages of October the reduction in fuel prices were not reflected in reduced transport charges.

The increase in education charges was also due to high cost of food and utilities.