Fast-rising inflation rates are threatening the country's 6.4 per cent growth rate projection and making more Ugandans poorer. The consumer price index indicates that inflation hit 6 per cent in February, up from 5 per cent recorded in January 2011. The spiralling rates have seen price levels of food, rent, school fees, transport and other household items shoot up since January 2011.
Mr Leonard Mutesasira, a Kampala businessman, said as prices continue rising, there might be an increase in the defaulting rates on loans as people, especially those with fixed income, will see it wise to spend their money on basic necessities than on repaying loans.
Mr Mutesasira says rising inflation might constrain banks' lending for long term since banks have to factor in inflation in the lending interest rates.
The measure of wholesale inflation, the Producer Price Index for manufacturing, which measures changes in prices charged by producers, rose to 18.3 per cent in December 2010 , from 15.3 per cent in November of the same year.