KIGALI - Consumer prices in Rwanda rose 1.04 percent in August from July, slowing the rate of deflation to 1.39 percent from 2.22 percent a month earlier, official data showed last week.

Prices of food and non-alcoholic drinks, which account for 54.2 percent of the central African country’s consumer price basket, fell 4.23 percent from a year earlier last month, the National Institute of Statistics of Rwanda (NISR) said.

"This is the first time in Rwanda that we have such low inflation. The main driver is low global inflation – when you look at all imported global prices …imports goods and services in Rwanda, the prices came down and in some cases very significantly,” Francois Kanimba , the Central Bank Governor told Business Times on Friday.

"When you look at the food markets - on average the price index of food items has been very stable over the year. This is due to very successful government program to increase productivity in the agricultural sector,” he added.

The Governor also allayed fears that the economy might be signaling deflation with prices on a downward trend since the beginning of this year.

Bearing in mind the headline inflation rate in 2008, the Governor argued that the current inflation rate was not alarming.

"We still are far higher than price level of 2007.  We are just catching up… if we can bring down prices by 5-10 percent to compensate huge increase in 2008,” he said

"When we can talk about deflation - it is the continuous process of prices declining which is not the case for Rwanda. We still have a cycle of increase and decline- prices have been very volatile,” Kanimba observed.

According to NISR within the food category, bread and cereal prices fell 2.6 percent from July and were down 12.7 percent from August 2009. Vegetables were also cheaper in August than a year earlier.

The NISR said the all Rwanda general index dipped to 101.9 in August from 103.3 a year earlier.

Housing, water, electricity, gas and other fuel costs, which have a 15.9 percent weighting in the consumer price basket, rose 1.24 percent from the same period a year ago, while transport costs were 2.89 percent higher.

The headline inflation rate has fallen steadily from a peak of 22.3 percent in December 2008 and slipped into negative territory in July.

Healthy rains in the first few months of 2010 helped boost harvests across the east African region and inflation rates have slowed thanks to lower local food prices.

NISR said the inflation rate in cities was 1.96 percent in August while the consumer price index for rural areas fell 3.04 percent from a year earlier.

The food weighting in the consumer price basket in cities is lower at 35.4 percent while for rural areas it is higher at 63.9 percent, reflecting different consumption patterns.

The consumer price index is a measure of the average change over time of goods and services purchased by households. 

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