Rwanda’s annual inflation rate reduced by 0.44 percentage point to 4.54 percent in May from 4.98 percent in the previous month, National Institute Statics of Rwanda (NISR) said.

Despite the sharp increase in inflation during the first quarter of this year, Rwanda’s inflation still remains the lowest in the East African region.

According to a statement from NISR, annual underlying inflation rate, which excludes fresh food and energy, cooled to 4.32 percent.

"The increase in the consumer prices index is attributable, primarily, to the increase in housing, water, electricity gas and other fuels that contribute 0.73 percent and 0.87 percent for transport,” the statement said.

Prices of local goods increased by 3.95 percent on annual change with a monthly change of -0.17 percent, while prices of imported products increased by 6.92 percent with a monthly change of 1.26 percent.

While presenting the 2011/12 budget, Finance Minister, John Rwangombwa, said that since the beginning of this, there has been a rebound in demand- pull inflation mainly reflecting the first round pass-through effects of the rising fuel and food prices.

"We are monitoring this situation continuously,” he said, adding that if the current situation persists then Rwanda’s inflation will rise to about 7.5 percent in 2011 from the 0.2 percent in 2010.

The budget proposed a reduction in fuel levies in a move aimed at curbing fuel pump prices and control inflation.

Average pump prices for both petrol and diesel at Rwf1,060 per litre in the country are much higher than the regional averages of Rwf839 and Rwf816 per litre for petrol diesel, respectively.

"This situation is not only untenable but is also a major factor in transport costs which in turn put pressure on our domestic inflation,” Rwangombwa said.

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