increased costs of raw materials, the impact of supply constraints as a result of the kenyan crisis, together with increased transportation costs due to the surge in the world oil prices, among others. 2. food prices as a major driver of the recent high inflation rates in terms of composition, an analysis of the major movers of inflation shows that the contribution of food ( comprising of food crop and food - non - food crop ) to inflation has been growing steadily since april 2008. the magnitude of the contribution of the above factor, however, equaled that of non - food items on average. previously, changes in food crop prices helped neutralize otherwise sharp increases in core inflation resulting in a less accelerated headline inflation rate. however, the annual food crop inflation started rising in february 2008 from levels of 4. 8 percent to 15. 4 percent in june 2008 and further to 33. 7 percent in august 2008 ; the highest food crop inflation recorded since may 2005. the total effect of the food price changes on headline inflation increased from 0. 6 percentage points in january 2008 to 9. 1 percentage points in august 2008. 3. opportunities and challenges before us while the short run hikes in prices may pose unfortunate and difficult stresses on the general standard of living, it also provides opportunities for the ugandan producers to increase domestic production to take advantage of the rising world commodity prices. increased domestic production should help boost supply of food crops, alleviate price pressures and also contribute to prosperity for all. information from the business confidence survey index conducted by bou continues to reveal that many firms are positioning themselves to increase investment and boost the supply of domestically produced goods within the near term. the increased regional demand for our products provides a challenge to firms and households to increase output and take advantage of the high international commodity price developments. uganda ’ s future competitiveness and ability to diversify exports depends fundamentally on reducing the costs of production through investment in infrastructure, particularly electricity, telecommunication and the transport system. indeed, to reap the benefits from expanded access to markets for export products that our people produce requires a solution to the binding supply side constraints, ability to comply with trade standards and rapid improvements in productivity. undeniably, the cost of doing business can be curtailed further by constituting effective institutions, particularly, the judicial and legal system, the investment, taxation and other regulatory authorities, among others. this institutional development should help maintain and improve uganda ’ s competitiveness in regional and international markets. it is anticipated that global inflation will decline

be equipped with the proper information to make informed choices and with proper regulatory and legal tools to guide operations and provide redress in case of disputes. • the bank of uganda exercises transparency in its conduct of monetary policy in order to promote investor confidence in the economy. indeed, this has resulted in investors developing confidence in the economy as evidenced by the recent surge in inflows from offshore investors as well as a surge in remittances from ugandans in the diaspora. however, some instability was experienced recently in the forex market, which tended to disrupt the conduct of monetary policy. i would like to assure you that the bank of uganda will continue to pursue its objectives of price stability and financial sector soundness rigorously in a transparent manner but will deal firmly with destabilizing speculative tendencies that could derail the achievements already made in the ugandan economy. this will be done with due regard to internationally accepted sound practices. we have, therefore, invited you the stakeholders to provide your input in the 5 - year strategic financial markets development plan for uganda, which involves a step by step plan for implementing the suggested reforms to remove the impediments that have constrained the development of the financial markets. this effort is part of and in line with bank of uganda ’ s continuous dialogue with financial sector stakeholders. similar activities are going on in all the other member countries of the east african community. i wish you all fruitful deliberations and i declare this workshop open.