Starting from August 2022, the Somali military has been actively involved in an offensive operation against the Shebab, a group with affiliations to al-Qaeda. This operation is being conducted in collaboration with local clan militias, and it’s receiving support from African Union forces as well as American airstrikes.
Although Shebab militants were expelled from Mogadishu in 2011, they have entrenched themselves deeply in expansive rural regions. From these areas, they persistently launch attacks targeting both security forces and civilians.
Somali President Hassan Sheikh Mohamoud is committed to eradicating Islamist militias from the nation. It is anticipated that he might imminently unveil the second stage of the military campaign aimed at countering the Shebab in the southern parts of the country.
“This decline is expected for all main components: Core, energy and fresh food inflation. We don’t see this rate increasing further, and we remain optimistic that inflation further reduces to our benchmark by next year…” Rwangombwa said announcing the rate-setting – committee’s decision.
Anticipated by the Central Bank, headline inflation is projected to fall within the specified range (below 8 percent), with an estimated average of 7.6 percent during the fourth quarter by year-end, followed by a decline to approximately 5 percent in the coming year.
Rwanda’s Consumer Price Index (CPI), the primary measure of inflation, displayed an 11.9 percent year-on-year increase in July 2023, a decrease from the 13.7 percent recorded in June 2023. The headline inflation rate saw a reduction to 15.2 percent in the second quarter, down from 20.2 percent in the preceding quarter.
Initially, analysts in Uganda were predicting a consistent Central Bank Rate (CBR) of 10 percent, a rate that had been upheld by the Bank of Uganda for nearly a year. However, a strong impetus to stimulate economic recovery, despite the challenges faced by the currency, is believed to have instigated this new decision.
Benoni Okwenje, the General Manager for Financial Markets Operations at Centenary Bank, expressed surprise at the rate cut. He foresees that the 0.5 percent reduction will likely lead to lower lending rates in the near future, although yields on specific treasury bonds experienced an increase the previous week.
During the first half of 2023, Uganda exhibited indications of an economic slowdown, coupled with decreased credit flows in the private sector. The Bank of Uganda cited these circumstances as influencing its decision to lower the policy rate. Notably, Uganda’s inflation had been subdued due to declining food prices.
Despite certain sectors reporting negative growth in the initial six months, headline inflation decreased from 4.9 percent in June to 3.9 percent the following month. This was attributed to declining prices of food crops, reduced fuel costs, and subdued consumer demand trends.
However, the recent suspension of development funding support by the World Bank, prompted by Uganda’s enactment of the Anti-Homosexuality Act of 2023, triggered concern among foreign investors. This led to a sell-off in the foreign exchange market, causing the Ugandan shilling to dip to record lows against the US dollar, reaching Ush3,770 per dollar. The currency slightly recovered following the Bank of Uganda’s latest announcement, indicating a stabilization of investor sentiments.
Furthermore, the unpredictability of climate change-related events could potentially impact agricultural production in the region.