Experts warn of slowed growth ahead of elections
Smoking is a major cause of cancer-related diseases. Thus government is seeking to control its use by lawfully regulating its sale, advertising and promotion, among others. FILE PHOTO.
Kampala- Former Finance minister, Ezra Suruma has said Uganda might experience slow growth given the uncertain election year ahead.
“The foreign direct investors are holding back their investments because of the election year. In my sense, we can’t expect a big improvement now,” he said.
Dr Suruma, one of Uganda’s renowned economists, told Daily Monitor the country is likely to experience slowed growth.
“We are supposed to grow at between 9 and 10 per cent but given the current trends we expect a modest growth of not beyond 5 per cent in the short-term,” he said.
Uganda is expected to hold a general election next year. In his Budget speech Finance minister Matia Kasaija said Uganda would grow by 6.4 per cent in the 2015/16 financial year.
The elections, which have already created a jittery economic environment, will come at a time when the country is experiencing volatile fundamentals including a rapid depreciation of the Shilling, rising inflation and prohibitively high interest rates, which have dampened the appetite for business loans.
Currently, according to Bank of Uganda, the Shilling has depreciated by more than 27 per cent with interest rates averaging at 24 per cent. Inflation which current stands at 4.9 per cent is slightly below the Central Bank’s 5 per cent.
Dr Fred Muhumuza, a former adviser at the Ministry of Finance, predicted difficult times ahead, “...especially now that interest rates have gone up. This means investments won’t do well and we are likely to see some business closures.”
He said Uganda would grow at 5 per cent, emphasising: “…any economy growing below 8 per cent is not a good sign.”
Dr Muhumuza said there is need to pray for good weather if Uganda was going to avoid a drastic spike in inflation in the event that there is food shortage.
While releasing the June inflation figures in Kampala recently Uganda Bureau of Statistics said growth in inflation had been slow because of stable food supply.
Dr Suruma urged BoU to come up with measures that would protect the shilling from collapse, given that it has in recent months presented the biggest threat to growth.
“BoU should come up with stronger measures to reduce liquidity (money in circulation) however difficult it might seem.”
Last week, governor of BoU said the fear of rising inflation had been heightened by the weak Shilling and the presence of too much money chasing a few goods.
On his part, Dr Adam Mugume, the BoU director for research, said stability of the Shilling was dependent on several factors some of which are beyond the Central Bank, adding: “No one can predict the likely trend of the dollar given the current challenges in Eurozone. But Bank of Uganda will continue to take measures to stabilise the currency,” he said.
Already, experts have warned the Shilling risks being bruised further, considering that huge sums of electioneering money have already been thrown into the economy.
