Inflation was subdued in 2010, averaging just 1.4%, as favourable rainfall kept food prices (which account for 29% of Togo's consumer price index) in check. However, inflation picked up strongly in December 2010, to 3.7% year on year, because of global food and fuel price trends, and it continued to rise in January, to 4.6% year on year, its highest level for 21 months, spurred by a steep rise in electricity tariffs. Prices rose by 3% in the month of December alone, driven by more expensive food and energy, and rose by a further 1.1% in January as electricity charges were increased by 25% in line with a new policy to allow the state-run distributor, Compagnie énergie électrique du Togo, to start making profits and stop relying on subsidies. The tariff increase for poor households was limited to 10%, but dearer electricity will lead to higher prices for a range of goods in the months ahead. Fuel prices were cut in January, with petrol declining from CFAfr560 (US$1.14)/litre to CFAfr540/litre, following the adoption of a new pricing mechanism, but the price was still 7% higher than a year earlier and is likely to rise again in line with world oil prices. Adding to inflation is the depreciation of the CFA franc, which was 7% weaker year on year against the US dollar in January. Inflation is therefore likely to rise in 2011 to more than 3%, although the increase will be larger if oil prices rise higher than currently expected or if poor weather affects food production.

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