Kampala- The fall in regional exports has made the growth of Uganda’s economy drop to 5.7 per cent from an earlier projection of between 6.2 per cent and 6.5 per cent for 2013/14 financial year.
Uganda’s high economic growth has been supported by its regional exports to neighbouring countries.
However, Bank of Uganda explains that regional trade to South Sudan and the DR Congo has been declining due to conflicts in these countries leading to a fall in economic growth.
“Real GDP growth for 2013/14 is projected to be at about 5.7 per cent and cuts across all sectors, with exception of agricultural sector,” deputy Governor Bank of Uganda Dr Louis Kasekende said on Friday while presenting the monetary policy statement for May.
Dr Kasekende said, however, the industrial sector is expected to register the strongest growth partly due to public expenditure on infrastructure.
For the 2014/15 financial year, which starts on July1, a new projection by Bank of Uganda reveals that growth in real economic activity for the year is forecast to remain relatively strong, in the range of between 6 per cent to 6.5 per cent, supported by public investment in infrastructure, domestic demand and the recovery in global economic activity.
The International Monetary Fund said in the new World Economic Outlook released in Washington DC on April 7, showed that the global economy will expand by 3.6 per cent this year and 3.9 per cent in 2015 respectively.
Explaining the domestic economic outlook at length for the next financial year, Dr Kasekende said: “The agricultural sector that has shown somewhat weaker performance compared to other sectors is expected to improve in the remaining part of the 2014.”
Uganda’s economic growth rate since 2011 has been growing below its potential of 6 per cent to 7 per cent as it had been in the past two decades.
To help the economy regain its growth potential, Bank of Uganda has been administering a flexible monetary policy by either lowering or maintaining its Central Bank Rate (CBR) at a reasonable level.
For instance, from January to April 2014, the CBR was maintained at 11.5 per cent.
On Friday, Bank of Uganda again decided to keep it at the same level for this month on account of the existing uncertainties in the economy.
Uganda is currently facing high fiscal deficits because of increased public expenditure amidst shortfalls in tax revenue collections.
Dr Kasekende said due to the revenue shortfalls and supplementary budgets, government borrowing from the domestic money market using treasury bills and bonds now stands at Shs1.7 trillion.
This is far above the Shs1.040 trillion the government had planned to borrow from the domestic market to finance the budget for 2013/14 financial year ending June 30, 2014.
Bank of Uganda Executive Director for Research Adam Mugume said regional exports have declined by 15 per cent which translates into $30 million (about Shs75 billion at the current exchange rate average of Shs2500).