Inflation in East Africa to slow – growth projected

(Bloomberg) — Inflation in East Africa may slow this year as food prices ease, while rising oil costs will probably boost imports and widen trade deficits, the International Monetary Fund (IMF) said.

Governments in Kenya, Uganda, Tanzania, Rwanda and Burundi must keep spending in check as European donors curb funding for budgets, IMF Deputy Managing Director Naoyuki Shinohara said at a conference today in Arusha, Tanzania.

Kenya, Uganda and Rwanda have pushed up interest rates since last year to curb inflation after the worst drought in 60 years fueled food prices. While the impact of drought has eased this year, the price of Brent crude has surged 16 percent in London since the beginning of the year, adding to import costs.

“Continued high oil prices and the risk of softening commodity markets may lead to widening trade deficits,” Shinohara said.

Growth in sub-Saharan Africa’s economy will probably accelerate to 5.5 percent this year from 4.9 percent in 2011, the IMF said on January 24. Shinohara said today the growth rate will be “close to” last year’s.

Foreign direct investment (FDI) in the East African region doubled to US$1.7 billion over the past decade, Shinohara said.