Uganda's headline inflation rose to a 7.2 per cent high year-on-year from 6.8 per cent in April, new data shows.

The Uganda Bureau of Statistics (UBoS) attributes this to a spike in the prices of some food items including fruits and vegetables.

The prices of milk, sugar, maize flour, matooke remained high in May due to the effects of a lingering dry spell and other vagaries of nature.

The latest UBoS figures come as the country awaits the formal presentation of the State of the Nation address on Tuesday June 6, and budget estimates for the year 2017/2018 on Thursday June 8.

Technically, the budget has already been passed by Parliament and the Thursday presentation will be more of a calendar event without any impact on the actual allocations.

But for a country still grappling with another tough economic year, Ugandans are still keenly awaiting to hear the priorities Finance Minister Matia Kasaija has set for the coming year.

Uganda Finance Minister Matia Kasaija. PHOTO | FILE

Budget lows

There will be little good news though.

Already, each Ministry has suffered a 10 per cent loss off its desired allocation to cater for ambitious infrastructure projects especially roads in the oil-rich Bunyoro region as government pushes a 2020 deadline to pump its first oil.

Government is looking to heavy investments in oil especially by private players to bolster the economy currently struggling to pick pace after years of declining performance.

Current projections put economic growth at a paltry 3.9 per cent a far cry from the 9.7 it posted only seven years ago.

Mr Kasaija’s budget stands at a high of Ush29 trillion ($8.2 billion), a large portion of which is expected to be raised by the taxman and the balance from both domestic and foreign borrowing as well as grants and donations in form of development aid.

Private sector

It’s not all doom and gloom though as Stanbic Bank's May Purchase Manager’s Index (PMI) - economic indicators of the health of private sector companies - shows a fourth straight month of positive improvement.

At 51.0 the seasonally adjusted PMI remained above the crucial 50.0 threshold for the fourth month in succession, signalling a continued expansion of the private sector.

“The PMI still showed some growth in May, albeit at a slower pace than the previous month. Interestingly, a notable slowdown in new orders was perhaps the main trigger in May, which is not entirely surprising given that Uganda’s key export markets continue to face enhanced political risks. This being said, aided by the easing of monetary policy, access to credit could begin to gradually improve in the second half of the year and thus ensure that the private sector’s recovery becomes more durable,” said Jibran Qureishi, regional economist, East Africa for the bank.

Stanbic Bank's head of global markets Anne Juuko said: “Despite the challenging market environment steady gains are being registered in key sectors of the economy. The upward trend in agriculture and construction slightly outweighed the deterioration of business conditions in the remaining sectors Industry, Services, Wholesale and Retail.”