Government Outlines Measures to Fight Inflation


Madam Speaker, under Article 101 (1) of the Constitution of the Republic of Uganda, the President is required, at the beginning of each Session of Parliament, to deliver to Parliament an address on the State of the Nation. This afternoon Madam Speaker, I am here to do two things.

First, I am here to fulfill the constitutional obligation by giving accountability of what has been done since the last address which I delivered on June 2, 2010.

Secondly, I wish to apprise you Madam Speaker, Hon Members of Parliament and the country, of the plans and strategies of the government for the next 12 months.

Madam Speaker, permit me to congratulate all the Hon Members of Parliament upon being elected to the 9th Parliament. I congratulate you Madam Speaker and your Deputy upon your election to your respective prestigious positions. I congratulate you, the Leader of the Opposition, upon your elevation to an essential office in democratic governance. I congratulate all those who have been elected to various levels of responsibility.

The political scene

Madam Speaker, on February 18, 2011 we held Presidential and Parliamentary Elections. These were followed by elections at various levels. I congratulate all Ugandans upon their peaceful and active participation in the electoral process. I also congratulate the Electoral Commission for a job well done. Where there was violence, it was the exception rather than the norm. I thank all Ugandans who participated and contributed positively to the success of the elections.

I call upon the Electoral Commission and all stakeholders directly concerned, to study, in depth, the various reports that have come up on the electoral process. The following must be of particular interest, among others:

* The management of the Voters’ Register, which I believe will be improved with the issuance of the National Identity Cards in the near future;

* The printing of Voters’ Cards and their security; and

* Voter education in the light of a high percentage of spoilt votes.

Madam Speaker and Hon Members, we should congratulate ourselves upon funding fully both the Presidential and Parliamentary elections. We did not ask donors for a single coin for the 2011 elections.

Madam Speaker, while we congratulate the winners in these elections, I wish also to thank those who did not make it, for their participation. I implore them to continue to actively contribute to the development process of our nation as they prepare to try again in the next elections. Those who feel strongly that they did not lose fairly, should seek redress in courts of law.

Madam Speaker and Hon Members, we must embrace all democratic principles within our respective political parties. Discipline is as important for democracy as it is for the management of our political parties. Democracy and discipline should be enshrined in all our political parties’ constitutions and regulations.

Constitutionalism and the Rule of Law

Madam Speaker and Honourable Members, I would like to re-affirm the National Resistance Movement Government’s total and firm commitment to the rule of law in the management of all public affairs of this country. Let us all remind ourselves that while Chapter Four of our Constitution is elaborate on the Promotion and Protection of Fundamental and other Human Rights and Freedoms, those rights and freedoms are NOT ABSOLUTE, hence the provisions of Article 43(1) that: “In the enjoyment of the rights and freedoms prescribed in this Chapter, no person shall prejudice the fundamental or other human rights and freedoms of others or the public interest.”

Equally important, under Article 17 of the Constitution of the Republic of Uganda, duties of a citizen include, among others, the duty to respect the rights and freedoms of others, to protect and preserve public property and the duty to co-operate with lawful agencies in the maintenance of law and order. General limitations on fundamental and other human rights and freedoms are spelt out in Article 43 (1 and 2). Let us all exercise and enjoy our rights and freedoms within the confines of law.

State of the economy

Madam Speaker and Honourable Members, on June 8, 2011, Uganda, like the other four partner states forming the East African Community, will be reading her Budget for the Financial Year 2011/12. The Budget Speech will give a detailed background to the economic outlook of our country.

Real sector performance

Uganda’s economy rebounded strongly in the first half of Financial Year 2010/11, recording a growth rate of 9 per cent in the July – December 2010 period. Between July–September 2010 an annual growth rate of 5.1 per cent was registered, while a 15.1 per cent annual growth rate was registered in October–December 2010.

The Industry and Services sectors grew by 17.6 per cent and 13.6 per cent respectively, in the two quarters. The month-on-month growth rate of economic activity in bricks and cement, saw-milling, paper and printing, as well as food processing was 8 per cent in December 2010.

This overall economic performance of 9.1 per cent in the first half of the current financial year was better than that registered during the entire Financial Year 2009/10, which was estimated at 5.2 per cent, as Uganda emerged from the global economic crisis. The economic performance is still substantially higher than global and regional economic growth prospects estimated at 2.5 per cent and 4.5 per cent respectively.

The Ugandan economy was expected to grow by 6.6 per cent for the whole of the Financial Year 2010/11, with forecast for future years exceeding 7 per cent per annum.

External sector

Madam Speaker, Uganda’s balance of payments with the external world continued to be constrained as a result of slower growth of exports, tourism receipts and remittances in the face of increased imports. This phenomenon is characteristic for exports given the on-going recovery from the global economic crisis by some of Uganda’s major trading partners. Imports on the other hand, are structurally dependent on domestic needs, such as oil and petroleum products.

Though export receipts increased in January 2011 to $211.6 million from $129 million in February 2010, imports were twice as much at $418.9 million, compared to export receipts of $328.8 million in February, 2010.

Formal non-coffee exports receipts that registered the largest increments include simsim, tea, cotton and fish. Uganda’s National Foreign Exchange Reserves amounted to $2.662 billion in January 2011 representing 4.6 months of import cover, compared to $2.812 billion and $2.498 billion in December and June 2010, respectively representing 5.2 and 4.9 months of import cover.

The Inter-Bank Foreign Exchange mid-rate in February 2011 was Shs2,341.9 per Dollar compared to Shs2,303.9 per Dollar in December 2010 and Shs2,257.3 per Dollar in June 2010. The continued depreciation of the Uganda shilling is in line with increased import demand in the face of weak export performance that has not fully recovered from the global economic crisis.

Monetary sector

Weighted average interest rates have remained stable over the period under consideration. The lending rates in January 2011 were at 20.1 per cent compared to the same level in June 2010 and the savings rate remained at 2.4 per cent during January 2011.

Treasury Bill rates exhibited increases between June 2010 and January 2011 as Bank of Uganda sought to stem excess liquidity. Consequently, the interest rate on the 91-day Treasury Bill rate increased to 9.1 per cent compared to 4.3 per cent, the 182-day Treasury Bill interest rate rose to 9.4 per cent compared to 5.3 per cent; and the 364-day Treasury Bill increased to 9.8 per cent compared to 6.2 per cent.

Private Sector Credit continued to grow at 35.9 per cent between July, 2010 and January, 2011 amounting to an average of Shs689 billion per month, compared to Shs438 billion per month between July, 2009 and January,2010.

Revenue performance

Revenue collections amounted to Shs3,281.2 billion against the target of Shs3,277.4 billion at the end of February 2011, representing growth of 20.1 per cent compared to the same period last financial year and a marginal surplus of Shs24 billion between July 2010 and March 2011.


The annual headline inflation rate (all items) for the year ending April, 2011 rose to 14.1 per cent from 11.1 per cent in March, 2011. The main driver of price increases remained food price inflation, which increased by 39.3 per cent. Fuel prices inflation stabilised remaining at 9.74 per cent in April, 2011. The recent increase in prices has been driven by a combination of domestic, regional and global factors, including poor rainfall and drought that affected food production and, consequently, food prices.

The loss of value (depreciation) of the Uganda shilling affected prices. The depreciation of the Uganda s hilling in turn, has been caused by the following three factors:

* Speculative tendencies in the run-up to the 2011 General elections;

* Slower growth of exports, tourism receipts and remittances, even while imports kept increasing; and by

* Continued increase in imports that are necessities, such as oil and petroleum products.

The Uganda shilling however, has been strengthening over the last few weeks as speculative pressures that emerged during the election period subside, giving relief for prices of imported goods and petroleum products. Government is committed to ensuring the stability of the Uganda shilling, as was shown by the active intervention by Bank of Uganda to mitigate volatility in the foreign exchange market.

Madam Speaker and Hon Members of Parliament, the recent rise in prices can also be explained by imported global inflation. On the regional and international scene, Uganda’s major trading partners have recently been facing a surge in commodity prices, particularly for oil and food prices. Indeed, world food prices have risen by 36 per cent, according to the World Bank.

In comparison, within the Eastern African Region, Kenya registered increases in overall inflation of 9.9 per cent in March, 2011 with annual food and fuel-related inflation rising by 15.9 per cent and 15.89 per cent respectively.

This followed a 6.5 per cent annual inflation which Kenya registered in February, 2011. Tanzania registered an annual inflation rate of 7.5 per cent in February, 2011 rising from 6.4 per cent in January, 2011.

Ethiopia’s annual inflation rate dipped to 16.5 per cent in February from 17.7 per cent in the January, 2011 as food prices rose more slowly. Food prices in Ethiopia rose by 12.8 per cent during February, 2011, slightly down from an increase of 13.6 per cent in January, 2011.

Zambia’s annual rate of inflation increased to 9.2 per cent in March, 2011 on account of increases in prices of non-food items such as fuel and transportation, lighting and clothing, even though food prices declined as the harvest period commenced.

Government measures to deal with inflation

Madam Speaker, measures to mitigate current inflation trends are packaged into short-term, and medium- to- long term actions, including the provision of energy and road infrastructure. In addition, critical measures that have a dampening impact on the rapid rise in both food and fuel prices have been put in place. Furthermore, it must be recognised that the government does not impose any tax on food items produced and consumed in Uganda. The only taxes on food are taxes on rice and sugar. These are meant to protect local production and, consequently, jobs.


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