KAMPALA (Reuters) - Ugandan police fired teargas and water cannon to disperse opposition supporters who had gathered in a Kampala suburb on Wednesday to mourn people killed during demonstrations earlier this year.

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Uganda, keen to attract foreign investors to turn the country into a major oil producer, was rocked by widespread anti-government protests in April and May that were sparked by rising food and fuel prices and a weakening currency.

At least nine people were killed in the government’s clampdown and opposition leader Kizza Besigye was arrested and badly beaten by security agents.

Wednesday’s clash followed a similar incident last week when police dispersed a much larger crowd which had gathered to hear Besigye’s renewed calls for protests, after inflation climbed to an 18-year high in July.

The East African country has enjoyed a decade of strong growth on the back of a boom in its construction and retail sectors, as well as a stable economic policies. But unrest over high food and fuel costs and a weak shilling threatens to reignite fears of instability and undermine its ambitions to become a top-50 oil producer.

Besigye did not appear to be at Wednesday’s rally, which had barely started in Kireka, a suburb of the Ugandan capital, Kampala, before heavily deployed police turned on the crowd.

“This is Benghazi and we want to start from here and launch our own liberation,” said opposition supporter Justus Muwanga, referring to the Libyan rebel capital, as he waved a poster of Besigye which depicted him as a rebel fighter.

ACTIVISTS NOT DETERRED

Police dispersed the crowd of several hundred people. The crowd attempted to reassemble and some speakers managed to address protesters for a short while before being tear gassed again.

“We didn’t allow the crowd to grow big because we wanted to prevent the worst from happening ... we were not opposed to the rally but they refused to listen to us on the venue where they should stage it,” said Ibn Senkumbi, a police spokesman at the scene.

Ugandan President Yoweri Museveni, in power for more than two decades, has vowed to crush the Besigye-led protests, blaming the rising food and fuel prices on drought and global increases in crude oil prices.

He won February elections that Besigye and other opposition leaders said were rigged, but Museveni accuses the opposition of being desperate for power.

Anne Mugisha, deputy foreign secretary for the Forum for Democratic Change, the largest opposition party, criticized the heavy-handedness of police, saying they were intent on “disrupting and criminalizing” the event.

“The issue wasn’t really a disagreement about the venue. Police deployed early and turned Kireka town into a battlefield. They were determined to fight and as usual they found an excuse to brutalize peaceful activists but we’re not deterred a bit,” she told Reuters.

Though protests have died down since the April-May violence, strikes by teachers, traders and taxi drivers -- incensed at double-digit inflation and a record-low shilling -- have increased in recent weeks.

The third largest economy in east Africa is expected to expand by 6.3 percent this year, benefiting from the emergence of a fledgling oil industry, but at the same time inflation is likely to stand at 13.8 percent by the end of this year, a Reuters poll of 10 economists showed.