Tribal Warriors - By Robert D. Kaplan | Foreign Policy

Tribal Warriors - By Robert D. Kaplan | Foreign Policy But these men are not horse-trading politicians as such; they have been fighting for something far more age-old, basic, and less susceptible to compromise: territory and honor, at least as they define it.

ECONOMIC CRISIS? UGANDA'S STORM IN A TEA CUP

Analysts have attributed the recent dramatic increase in prices to seasonal factors, a weaker shilling and uncertainty brought on by the recently concluded elections, while officials in the know are confident it’s a temporary situation that will be resolved in a matter of weeks.

Annual inflation came in at 11.1% in March. The dollar hit record highs of sh2,400 last month, although it has since fallen back to a still high sh2,350. Diesel the less pricier of the regular fuels has cracked the sh3000 a liter mark. And there is a looming famine on account of less than adequate rain.

Annual inflation in a given month is a comparison between that month and a similar month a year ago and not a comparison between successive months.

In our case most of the increase in inflation came from a jump in food prices between February and March, which jumped 29.1% in March from 6.9% in February,

“The increase in prices of these food items is attributed to reduced supplies to the market due to prolonged dry season in most parts of the country,” Uganda Bureau of Statistics said in their monthly report at the end of March.

They added that “Prices for petrol, diesel and paraffin went up due to the rising price of oil on the international market.”

Wheareas the depreciation of the shilling against the dollar is a major factor at the heart of the current upward pressure on prices, observers say seasonal factors are at play.

“People are ignoring – intentionally or otherwise the seasonal factors. At this time every year there is a rise in prices as food supplies reduce, this year is no different,” Makerere University Economic Policy Research Center’s (EPRC) Lawrence Bategeka said.

Over the last four years a pattern is emerging. The month of March sees some of the highest inflation rates in the year regardless of bumper harvest or drought.

In 2008 March inflation came in at 8.6% higher than the previous two months. In 2009 it was 14.1% in March last year it was 7.6%, the third highest inflation rate in 2010. And again this year annual inflation in March nearly doubled the February figure of 6%, according to Uganda Bureau of Statistics figures.

In addition the Bategaeka, a senior research fellow, said a combination of low expectations fuelled the inflation.

“The meteorological departments announcement that the rains were not due until May and subsequent announcements for people to keep food in anticipation of drought forced food prices up.”

Election related capital flight was a factor.

“People and companies changed money even repatriated it putting pressure on the shilling and some factories even closed, these things filtered down into the exchange rate. A weaker shilling meant our exports were more expensive and caused price to increase,” Bategeka said.

And finally Bategeka rounded on government monetary policy,

“We have not been paying attention but its clear government has borrowed from the central bank compromising the Bank of Uganda’s ability to mitigate the shilling’s slide,” he said.

Uganda’s reserves have fallen to just under $2.0b from about $2.8b five months ago Bategeka said, in contravention of our targets with the International Monetary Fund (IMF). The target is for Uganda’s reserves to remain at about four times our average monthly imports of $700m.

The latest Bank of Uganda report shows that reserves were down to about $2.66b in January from $2.8b in December or 5.2 months of imported goods and services.

Government has already put out a statement that it drew down on reserves to buy jet fighters and other military hardware so this should not come as a surprise.

Speaking on condition of anonymity officials familiar with the country’s monetary policy have said that a windfall from the taxes from the sale of concesions in the oil field swill be more than adequate to bridge the deficit in our reserves.

“The current issue is being blown out of proportion. We have seen worse times in the last five years. This is a temporary situation which will be corrected when the oil money comes in,” the official said.

Last week energy minister Hilary Onek said government can expect a combined total of $905m ( sh2,126b) from capital gains taxes when the oil fields change hands this year.

Officials point to the Kenyan post election violence at the beginning of 2008 that cut off our fuel supplies, causing lines at the petrol stations and fostered a fuel black market unseen since the mid eighties, as a more trying economic time.

That year food prices leapt as our eastern neighbours sucked up our surpluses to bridge the gap caused by the destroyed crop in the Kenyan rift valley. All this culminated in an inflation rate of 15.9% in August of that year.