Bank of Uganda forecasts inflation upsurge ahead of general elections

Bank of Uganda forecasts inflation upsurge ahead of general elections
BoU Governor Emmanuel Tumusiime-Mutebile

Kampala, Uganda | URN | Bank of Uganda (BoU) has forecast a likely rise in prices of goods and services in the months towards the general elections.

According to BoU Governor Emmanuel Tumusiime-Mutebile, core inflation, which measures the increases in prices of goods and services less electricity, food and water, will peak 6.4 per cent between October and December 2020.

Mutebile was reading the monetary policy statement on Thursday.

This will be above the regular BOU target of 5 per cent. Core inflation is currently at 4.3 per cent.

This is an indicator that the Central Bank is looking ahead to electoral spending from candidates chasing voters.

The 2021 polls are expected to be particularly expensive for the country as President Yoweri Museveni tussle to endear himself to the youths from MP Robert Kyagulanyi, who has indicated he will stand for presidency.

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Already, Museveni has moved around the country, dishing out money to different associations, a move seen by analysts as early campaigns.

Asked whether he thinks the political climate will directly influence the rise in prices, Mutebile said as long as the polls are not directly financed through the central bank – say by asking that more money be printed – the period may pass with less impact.

Dr Adam Mugume, the BoU Executive Director for Research, said from the government’s side, election spending has already been planned for. This, he said, will be seen in the increased expenditure in the next budget.

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Mutebile said the depressed global economy from squabbles between the USA and China. The Europe Union is also expected to fall into a recession. If this happens, it means Uganda’s source of funding but also things like tourists.

Locally, Mutebile said unpredictable weather was a major risk.