Economy struggles amid Covid restrictions – BoU
Women walk past closed shopping arcades on Luwum Street, Kampala, during the lockdown last year. Sluggish economic activity characterised by close to two years of strict coronavirus restrictions in the country have hit the economy hard and slowed growth. Photo | File
What you need to know:
- Mr Emmanuel Tumusiime-Mutebile, the Bank of Uganda governor, in his statement describes the pandemic and the associated measures to contain it as challenging to the economy.
Sluggish economic activity characterised by close to two years of strict coronavirus restrictions in the country have hit the economy hard and slowed growth, according to the Bank of Uganda 2021 annual report.
Mr Emmanuel Tumusiime-Mutebile, the Bank of Uganda governor, in his statement describes the pandemic and the associated measures to contain it as challenging to the economy.
“Although Uganda gradually eased the lockdown measures during the first half of the financial year, the antecedent global and domestic supply chain disruptions led to a severe contraction in economic activity and sudden decline in consumer demand,” he said.
Some of the vital sectors of the economy include manufacturing which grew by only 2.1 percent, service (2.5 percent), agriculture (3.5 percent) below last year’s 4.8 percent. Real Gross Domestic Product (GDP) increased “marginally” from 3.0 percent to 3.3 percent.
The pandemic also continued to impact on Foreign Direct Investments (FDI) into the country with net inflow declining to $847m from last year’s $967m.
Mobile Money which struggled in April 2020, when government instituted a strict lockdown, has gradually recovered since with value and number of deposits and withdrawals increasing.
In 2021, the value of Mobile Money increased by 42.26 percent to Shs113.38 trillion from Shs79.7 trillion while the volume of transactions increased by Shs73o million from Shs3.16 billion to Shs3.89billion.
BoU attributes the growth to more people embracing the sector as a result of the pandemic. The number of active mobile money users also increased from 17.5 million to 21.18 million in 2020.
The Central Bank projects that the economy will recover with growth of between 5.5 and 6 per cent during the 2022/2023 Financial Year, before increasing to between 6.5 and 7.5 percent in the next two to three years.
This is will depend on increased vaccination and government easing restrictions such as the 7pm curfew and opening up sections of the economy that remain closed.
On Tuesday, Uganda received an additional 460,800 doses of the Johnson & Johnson (J&J) vaccine purchased by government. Uganda has close to 7 million vaccines and expects about 3.2 million more of the J&J and Sinopharm doses in the coming days, according to the National Medical Stores (NMS). Vaccination, however, has been very slow per the Ministry of Health reporting.
Uganda also remains the only country in the East Africa region with very strict Covid-19 measures.
On Wednesday, Kenya lifted a nationwide curfew that had been in place since March 2020 to curb the spread of the coronavirus. Further restrictions were eased following the presidential directive.
Other East African countries including Burundi, Tanzania, and South Sudan have had a different approach to the pandemic.
What govt is doing to support economic growth
•Pursue growth-with-jobs in the medium term.
•Building capability of the economy to create opportunities, employ the youthful population, raise household incomes, add value to what the people of Uganda are producing and industrialise the country; and raise exports.
•Robust analysis of the economy (both macro and micro-economy) to understand its growth drivers, linkages and leakages, market failures, and any policy-induced distortions (government failures).
•Mobilisation of financial resources, particularly domestic resources.
•Expenditure management to increase allocative efficiency.
•Effective policy coordination and complementarity to ensure the fiscal and monetary policies support the fulfillment of shared overall policy objectives, particularly the deficits and debt, and macro-economic stability.
•Rebuilding fiscal space to raise spending without endangering market access and debt sustainability.
•Supporting the reform process of the larger government to facilitate delivery of services by ensuring implementation discipline, including implementation of an e-Government and e-Procurement without further delay.
•Reduce the fiscal deficit in the medium term which has increased almost unsustainably to above nine percent yet it should be kept within three percent.
Ramathan Ggoobi, Permanent Secretary and Secretary to the Treasury (Source: MOFPED TIMES ISSUE 4)
