Uganda’s annual inflation rose in May, driven by a sharp acceleration in fuel and transport costs linked to higher global oil prices, reinforcing concerns at the Bank of Uganda over mounting external inflation pressures even as food prices remained relatively subdued.
Annual headline inflation increased to 3.2 per cent in May from 3 per cent in April, according to data released by the Uganda Bureau of Statistics on Friday. On a monthly basis, consumer prices rose by 0.7 per cent, up from 0.6 per cent in April.
The increase was driven primarily by energy, fuel and utilities inflation, which accelerated to 9.1 per cent year on year from 6.1 per cent in April. Monthly inflation in the category rose to 2.7 per cent from 1.8 per cent, extending a sustained rise in energy-related costs.
Liquid energy fuels inflation more than doubled to 16.6 per cent from 7.7 per cent a month earlier. Petrol inflation accelerated to 16.6 per cent from 8.7 per cent, while diesel rose to 21.5 per cent from 10.8 per cent. Kerosene inflation climbed to 25.4 per cent from 7.5 per cent.
The rise in domestic fuel costs follows higher international oil prices amid continued geopolitical tensions in the Middle East, which have increased pressure on imported energy markets across East Africa.
Transport costs also accelerated sharply, reflecting the pass-through from higher pump prices. Annual transport inflation rose to 6.7 per cent in May from 3.6 per cent in April, while passenger road transport services inflation surged to 10.6 per cent from 2.2 per cent.
Services inflation increased to 4.6 per cent from 4.1 per cent, while monthly services inflation accelerated to 0.7 per cent from 0.5 per cent in April, suggesting higher transport and energy costs are beginning to feed more broadly through the economy.
Core inflation, which excludes food crops, energy, fuel and utilities, held steady at 3 per cent year on year. On a monthly basis, however, core prices rose by 0.5 per cent, unchanged from April and well above the zero monthly reading recorded in March.
Core goods inflation eased to 1.7 per cent from 2.0 per cent, indicating that the recent pickup in underlying inflation pressures remains concentrated in services rather than consumer goods.
By contrast, food price pressures continued to moderate. Annual food crops and related items inflation slowed to 0.2 per cent from 0.6 per cent in April, helped by falling prices for matooke, beans and sweet potatoes.
The divergence in inflation components reflects the structure of Uganda’s consumer basket, where core and food categories carry greater weight than energy-related items, limiting the overall rise in headline inflation despite the sharp increase in fuel costs.
The latest data places inflation below the Bank of Uganda’s medium-term target of 5 per cent. However, the renewed rise in energy prices is likely to complicate the outlook for monetary policy if imported inflation pressures persist.
In its May monetary policy statement, the central bank said there was a “strong likelihood” that the oil price shock would continue feeding through the economy in the near term, lifting the prices of other goods and services. Policymakers revised their short-term inflation forecast upwards, projecting core inflation in the range of 5 to 5.3 per cent over the next 12 months.
The Bank of Uganda nevertheless kept its central bank rate unchanged at 9.75 per cent, arguing that the current policy stance remained appropriate despite heightened uncertainty linked to the conflict in the Middle East. The central bank said monetary policy would remain “agile and responsive” as it assessed the evolving balance of risks.
Read: Bank of Uganda’s Monetary Policy Statement for May 2026 — Full text
The MPC also noted that month-on-month core inflation rose to 0.5 per cent in April from zero in March, signalling that higher fuel costs were beginning to transmit more broadly through the economy. Policymakers warned that sustained increases in energy prices could generate wider second-round inflationary pressures.
The central bank maintained its FY2025/26 growth forecast at 6.5 to 7 per cent, supported by resilient private sector activity and broad-based expansion across agriculture, industry and services. Over the medium term, growth is projected to average around 8 per cent, underpinned by oil exports and business investment.
However, the Bank of Uganda said risks to both inflation and growth remained tilted to the downside and upside respectively because of geopolitical tensions, global policy uncertainty and the potential for persistently high energy prices.
The central bank held its policy rate at 9.75 per cent at its last meeting, citing stable core inflation, a relatively firm exchange rate and contained domestic demand conditions. Policymakers nevertheless warned that external risks linked to geopolitical tensions and commodity prices remained elevated.
With fuel-driven inflation now broadening into transport and services categories, investors will be watching closely for any shift in the Bank of Uganda’s policy stance at forthcoming monetary policy meetings, particularly if oil prices remain elevated through the second half of the year.
Although underlying inflation remains moderate, May’s data suggests external energy shocks are once again emerging as the principal upside risk to Uganda’s inflation outlook.
