The inflation rate will increase in 2011 after falling to an estimated average of 7.7% in 2010-its lowest rate since 2004; this was almost entirely the result of deflation in food prices. Further improvements in agricultural output will limit food price inflation in 2011, but non-food inflation will accelerate. This will be led by international price rises for capital goods such as construction materials; continued inefficiencies in supply chains from ports in Djibouti, Kenya and Sudan; and the 16.7% devaluation of the exchange rate in September 2010. We forecast that inflation will average 11% in 2011 and that structural constraints will keep it high, at around 10%, in 2012.