Ugandan consumers could get enticed to spend big as inflation rates fall and prices of commodities head south.

Latest data from the Bank of Uganda (BoU) shows inflation levels averaged 3.2 percent in the financial year 2023/24 while annual headline inflation clocked 3.9 percent at the end of June 2024. Annual headline inflation stood at four percent in July.

The Uganda shilling recovered from a record low of Ush3, 942 against the US dollar in August 2023; a source of external inflation pressures tied to imported goods, to less than Ush3, 800 posted in June 2024 on the back of tight monetary policy actions and increased coffee exports.

Easing inflation pressures felt in the second half of 2024 are partly reflected in reduced prices for popular household items.

For instance, a kilogramme of sugar currently costs Ush4,000 ($1.1) in some trading centres compared to Ush4,500 ($1.2) per kilogramme recorded at the beginning of this year. A kilogramme of rice costs Ush3,000 ($0.8) in Kampala city suburbs compared to Ush3,500 ($0.9) recorded at the beginning of 2024, according to local retailers.

Local fuel prices have stabilised at Ush5,000 ($1.3)-Ush5,500 ($1.5) per litre since last year following drastic changes in the international oil market.

Local household consumption levels increased by 3.6 percent in 2022/23 and also grew by 8.2 percent in 2023/24, according to a PWC Uganda economic brief. Yet this mix of higher disposable incomes and economic uncertainty could inspire extra caution among local consumers.

“Inflation might have gone down but the economy is too hard on most of us,” Fauz Kaliisa, a forex dealer in Kampala told The EastAfrican.

“This means any savings realised at this time must be put aside for a rainy day to take care of food, school fees, and medical.”

Uganda’s annual headline inflation had hit 10.7 percent in October 2022 amid rising fuel and food prices prompted by consumer demand that arose from the reopening of several economies after a two-year Covid-19 lockdown period.

“What we are seeing is a reduction in the speed of price movements and not collapsing prices,” observed Paul Corti Lakuma, a policy research fellow at the Economic Policy Research Centre (EPRC) at Makerere University.

“Consumers are rational people and I see signs that indicate things might get better soon for them.”