Uganda's annual headline inflation has dropped to 3.4% for the year ended February 2013 down from 4.9% a year earlier, the Uganda Bureau of Statistics announced on Feb. 28.

The statistics body said the fall was attributed to reductions in food prices and other components of in the inflation basket. Food price annual inflation reduced to a minus 6.2% for the year ending February 2012 from 3.0% a year earlier.

The Energy Fuel and Utilities annual inflation rate decreased to a minus 3.3%for the year ending February 2013 compared to the minus 2.1% registered for the year ended January 2013. Similarly, the annual Core Inflation rate, which excludes food crops, fuel, electricity, and metered water declined slightly to 5.5% for the year ending February 2013 compared to the 5.6% registered for the year ended January 2013.

The country's annual inflation rate was last recorded at its lowest mark 3.1% in December 2010 and has since been rising, touching 30.4% mark in October 2011. The rise has since caused a rise in the cost of doing business and caused protests by traders.

Analysts say reductions in inflationary rates is good news for the economy since policy makers will think of easing interest rates which will encourage borrowing and ultimately support investment and economic growth.

The Central Bank will announce the central bank rate for March next week.