By John Masaba

Motorists hitting the road will continue to benefit from a drop in petrol prices. The drop is expected to have huge boost on the economy, bringing down inflation.

Annual headline inflation for the year ending January 2012 dropped to 25.7% down from 30% in October, according the Uganda Bureau of Statistics.

Gershom Musamali, a senior information officer at the Uganda National Bureau of Statistics, says they have gathered information on the general trend of products, which shows a drop in inflation rates, attributed to the drop in prices for fuel.

Diesel, a major item in transportation, has dropped to sh3,040 per litre down from sh3,700 in October. Petrol is down to sh3,400 (sh3,330 in some places) down from sh4,000 three months ago.

Experts attribute the development to the massive gains the shilling has made against the dollar in the past months. The exchange rate is on average sh2,300 against the dollar down from sh2,900 in October last year.

Daniel Segal, the CEO, Tapuv Uganda, a petroleum consultancy, says the strengthening of the shilling, coupled with the drop of petroleum on the world market has played a big part. “What we are seeing is a reflection of drop in oil prices in the last quarter of last year. Usually it takes 4-6 weeks before effect can be experienced here,” he says.

Segal says although the prices of oil have gone up again, pump prices in Uganda are dropping because of the strong shilling.

Issa Sekiito, the spokesperson, of Kampala City Traders Association (KACITA), says the traders are now saving on transportation.

“A trader transporting produce from Kabale to Kampala spends less and this shows in prices in markets,” he says. However, he says the impact is not yet widely felt.