Rwanda’s year-on-year inflation rate rose to 1.98 percent in June from 0.32 percent a month earlier, the National Institute of Statistics of Rwanda (NISR) said in a statement.

Prices of food and non-alcoholic drinks, the component with the biggest weight in the central African country’s consumer price basket, climbed 1.86 percent from a year earlier, boosted by a 9.34 percent year-on-year jump in the cost of vegetables.

Transport costs rose 9.76 percent from a year earlier, education was up 7.35 percent while clothing and footwear prices rose 5.74 percent from June 2009.

"In June 2010 the all urban general index is established at 104.3 and this stands for an increase of 0.32 percent over the previous month which was 104.0. In annual change it increased by 5.03 percent compared to 4.21 percent in the previous month.,” NISR on its website.

"This gives a general inflation rate by an annual average of 4.8% during the month of June 2010. The underlying inflation rate (excluding fresh food and energy) is increased by 0.34 percent if compared to the previous month and increased 3.12 percent on annual change,” it added.

According to the statistics body the annual average underlying inflation rate is 3.3 percent in June 2010 down from the previous month.

Last week the central bank announced that it would maintain its repo rate at 7.0 percent, saying inflation was low and there was sufficient liquidity in its banking system.

"This decision is consistent with the current macroeconomic environment characterized by low but rising inflation ... as well as the sufficient level of liquidity in the banking system,” National Bank of Rwanda Governor Francois Kanimba told a news conference on Friday last week.

Rwanda is due to hold a presidential vote in August that analysts have tipped incumbent President Paul Kagame to win.

Kanimba said any increased spending ahead of the vote could boost economic activity, but inflation could pose a challenge.

"If the production capacity doesn’t respond to the high demand then there could be inflationary pressure and thus this could affect the economy negatively. However in Rwanda I don’t see huge spending. The economy won’t be affected in that manner,” Kanimba said.

Like Kenya, Uganda and Tanzania, inflation rates in Rwanda have been slowing gradually over the past year and expectations of better harvests have improved the inflationary outlook even though economic growth is now picking up.

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