inflation3.jpgMarket watchers have warned that the recent hike in electricity tariffs could fuel inflationary pressures on the economy by affecting the country’s major economic drivers which are agriculture and mining.

The country has been experiencing low inflation levels for the greater part of the year.

Statistical data shows that inflation, which was contained below 3% during the second quarter of the year, is on an upward trend, reaching 3,3% by July up from 2,9% in May and June this year.

However, the recent 31% hike on electricity tariffs coupled with rising prices of basic commodities have raised fears of increased inflation.

An economic analyst, Mr Christopher Mugaga said there is a tendency to underestimate the cost of electricity as affecting only urbanites but it is a major cost of production in the country’s most performing sectors.

“Agriculture, mining as well as the local manufacturing industry would not be spared either, and this would definitely result in the costs being transferred to the consumers,” said Mr Mugaga.

Inflation, which is used as a benchmark for assessing macro- economic stability is being projected by Government to end this year on a positive rate of at least 4,5% but economists warn that failure by the business community and other strategic sectors in exercising restraint on price increases as well as avoiding profiteering will lead to current gains on inflation being eroded.