5% inflation target attainable - Stanbic
Apr 11, 2006
UGANDA'S underlying inflation target of 5% by June this year is within reach despite pressure from power shortages, drought and volatile global oil prices, Stanbic Investments Management Services’ (SIMS) April report has said.
By Sylvia Juuko
UGANDA'S underlying inflation target of 5% by June this year is within reach despite pressure from power shortages, drought and volatile global oil prices, Stanbic Investments Management Services’ (SIMS) April report has said.
“Underlying inflation (excluding food) remained unchanged at 5.1% year on year in March. Indications are that it will be contained below 5% by the middle of this year although high world oil prices are still a risk,†the market report said.
Severe drought, which caused a hike in domestic food prices and power shortage, that increased production costs, pushed the overall inflation rate to 7.9% at the end of March.
According to the report, inflation pressures are expected to feed into Treasury Bill (TB) rates in the medium-term though the rates have been on a downward trend. The benchmark 91-day TB rate edged lower to 7.45% in February from 7.61% in January.
However, SIMS expects the exchange rate to stabilise in the next few months, though it will be under pressure from inflation and lower than projected export earnings due to drought.
The shilling has edged lower against the dollar as corporate players return to the market.
The report says the cancellation of multi-lateral foreign debts by the World Bank and International Monetary Fund (IMF) will create fiscal space for the Government to spend more money on education, health and infrastructure.
This comes against a background of macro-economic stability that will be sustained by the IMF’s multi-year Policy Support Instrument (PSI).
The report says the PSI, which will be discussed by the Government and the IMF, will focus on the second generation of structural reforms that are required to implement the revised Poverty Eradication Action Plan.
“These reforms include structural measures that are set to boost private sector activity, reduce business costs and improve Uganda’s competitiveness. One urgent item on the structural agenda is the electricity shortage,†the report said.
UGANDA'S underlying inflation target of 5% by June this year is within reach despite pressure from power shortages, drought and volatile global oil prices, Stanbic Investments Management Services’ (SIMS) April report has said.
“Underlying inflation (excluding food) remained unchanged at 5.1% year on year in March. Indications are that it will be contained below 5% by the middle of this year although high world oil prices are still a risk,†the market report said.
Severe drought, which caused a hike in domestic food prices and power shortage, that increased production costs, pushed the overall inflation rate to 7.9% at the end of March.
According to the report, inflation pressures are expected to feed into Treasury Bill (TB) rates in the medium-term though the rates have been on a downward trend. The benchmark 91-day TB rate edged lower to 7.45% in February from 7.61% in January.
However, SIMS expects the exchange rate to stabilise in the next few months, though it will be under pressure from inflation and lower than projected export earnings due to drought.
The shilling has edged lower against the dollar as corporate players return to the market.
The report says the cancellation of multi-lateral foreign debts by the World Bank and International Monetary Fund (IMF) will create fiscal space for the Government to spend more money on education, health and infrastructure.
This comes against a background of macro-economic stability that will be sustained by the IMF’s multi-year Policy Support Instrument (PSI).
The report says the PSI, which will be discussed by the Government and the IMF, will focus on the second generation of structural reforms that are required to implement the revised Poverty Eradication Action Plan.
“These reforms include structural measures that are set to boost private sector activity, reduce business costs and improve Uganda’s competitiveness. One urgent item on the structural agenda is the electricity shortage,†the report said.