What you need to know:
- The International Monetary Fund says that whereas central banks must seek ways to contain inflation, they must not stifle efforts of ongoing business recovery
International Monetary Fund (IMF) has said financial regulators across the global are facing a difficult balancing act as they seek to manage inflation, amid the need to support economic recovery.
In its Regional Economic Outlook for Sub-Saharan, the IMF indicated that with the increase in inflation and rising global interest rates, most regulators have been tightening monetary policy, which creates the risk to extinguishing the economic recovery momentum that most economies had adopted after Covid-19 related disruptions.
“In a context of fiscal consolidation and a fragile recovery, authorities face a difficult balance. They should increase policy rates gradually and cautiously, keep a close eye on inflation expectations and the level of foreign exchange reserves,” the IMF said, noting that due to current global economic challenges, projecting Uganda’s economic outlook to keep within 4.4 percent during 2022.
Uganda continues to experience slower growth but remains among countries in sub Saharan Africa with impressive economic expansion despite global turmoil.
Uganda’s growth lies above sub Saharan Africa’s of 3.6 percent. However, Uganda is behind its regional peers, apart from Burundi, which is expected to grow at 3.3 percent.
During 2022, the IMF indicated, that South Sudan is expected to grow at 6.5 percent while Rwanda will grow at 6 percent. Kenya and Tanzania are expected to grow at 5.3 percent and 4.5 percent, respectively.
Dr Abebe Aemro Selassie, the IMF African department director, said sub Saharan Africa had showed signs of recovery toward the end of 2021, but was disrupted, noting that the region’s growth will drop from 4.7 percent in 2021 to 3.6 percent due to slowdown in the global economy, tighter global financial conditions, and volatile commodity prices.
However, he noted that oil exporters will benefit from higher oil prices to grow by 3.3 percent up from 3.0 percent while resource intensive economies will, on the other hand, grow by 3.1 percent down from 5.1 percent.
Dr Abebe also said non-resource-intensive countries, which enjoy a more diverse economic structure, will continue to be among sub Saharan Africa most dynamic economies but in line with a worsening in their terms of trade, they will only grow by 4.6 percent.
IMF also indicated that sub Saharan Africa must prioritize food insecurity, manage the shift in monetary policies, and consolidate public finances amid tighter financial conditions, as well as build resilience to absorb the cost of a higher interest bill.