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Expert warns as February inflation rate doubles

Peter 7th Mar, 2025 Economy Pedson Mumbere
Expert warns as February inflation rate doubles

A market vendor awaits customers at a market in Kampala. Weather-induced scarcity led to an increase in inflation in February. FILE PHOTO


Uganda’s monthly headline inflation surged to 0.6% in February 2025, doubling from 0.3% in January, according to the latest data from the Uganda Bureau of Statistics (UBOS). The increase was primarily driven by rising prices of key food items, including tomatoes and fresh leafy vegetables.

Other notable contributors to inflation included fresh cassava, which saw its price rise from 2.5% in January to 4.1% in February, and dry beans, which increased from 0.4% in January to 2.8% in February.

In actual market prices, a kilogram of tomatoes that cost UGX2,576 in January is now selling for UGX 2,813, while green pepper prices jumped from UGX 2,267 per kilogram to UGX 3,261. Fresh tilapia, previously priced at UGX 16,098 per kilogram, now costs UGX17,231.

  • Responding to the price hikes, Samuel Echoku, a microeconomic statistician at UBOS, attributed the fluctuations to market dynamics. “All is determined by demand and supply, and most of these products are seasonal. The recent increases are largely due to reduced supply following unfavorable weather conditions in major food-producing regions,” Echoku said.

The annual headline inflation for the year ending February 2025 increased to 3.7%, up from 3.6% recorded in January 2025. However, annual core inflation, which excludes volatile food and energy prices, slowed to 3.9% in February from 4.2% in January.

Additionally, the monthly inflation for the construction sector increased by 0.2% in January 2025, compared to 0.1% recorded in December 2024. This was attributed to rising costs in the construction of buildings and civil engineering works. Materials that saw significant price increases included sand, cement, aggregate, hardcore, and broken stone, while price declines were noted in iron, steel rods, and angles.

  • In general terms, 2024 was good for the business sector, thanks to the relatively better macro-economic environment.

The country’s macroeconomic indicators held steady in the year with an average GDP growth of 6.6%, while the average headline inflation moderated to 3.3% in 2024, from 5.5% in 2023, and tracked below the 5.0% Central bank target.

Additionally, the local currency appreciated by 2.7% against the US Dollar in 2024, anchored by reforms in the interbank foreign exchange market, which have promoted currency stability.

Economists caution that if inflationary pressures persist in 2025, consumers may continue to experience increased costs of living, which may affect aggregate spending. Policy interventions to stabilize food production and supply chains would therefore be crucial in mitigating further price surges.

Economist Fred Muhumuza told this publication that inflation in Uganda is largely driven by structural challenges in the economy.

  • “The persistent inflationary pressures are not just about external shocks but also domestic inefficiencies, such as post-harvest losses and inadequate market infrastructure. Addressing these issues requires long-term investment in value addition and improved storage facilities,” Muhumuza explained.
  • With inflation trends showing fluctuations, policymakers and economists remain watchful of external and internal factors influencing Uganda’s economy. The government’s ability to manage inflation will be critical in maintaining economic stability and ensuring sustainable growth.

Last month, the Bank of Uganda (BoU) decided to maintain the Central Bank Rate (CBR) at 9.75%, saying the near-term inflation outlook was largely contained, though external uncertainties continue to pose risks to economic performance.

BoU Governor Michael Atingi-Ego explained that the Central Bank anticipated core inflation to stay within a 4%-5% range over the course of 2025, but global uncertainties continued to present a clear risk to the forecast.

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