Financing for inclusive growth crucial for economic development – Atingi-Ego

From a policy perspective, the deputy governor Bank of Uganda has said financing for sustainable and inclusive growth is crucial for economic development and more importantly now than ever before.

Speaking at the signing ceremony for the Administration Agreement between Sida and the World Bank to support Uganda’s Multi-Donor Trust Fund (MDTF) – Window III “Crowding in Private Sector for jobs”, Dr Michael Atingi-Ego said a combination of monetary and fiscal policies is necessary to crowd in the private sector, build resilience in this dynamic environment and achieve sustainable economic recovery going forward.

“Fiscal policy has, however, been challenged by the adverse effects of the pandemic; which have put a strain on public resources on account of underperformance in tax revenue and growing debt liabilities. This underscores the need for concessional financing and makes your interventions and support very timely,” he said on September 27 at Swedish Ambassador Residence in Kololo.

Through the partnership with the World Bank, Sweden will provide funding equivalent to Swedish Krona 124 million about $11 million (Shs42 billion) for the next 4 years.

Dr Atingi-Ego said the objective of the support from Sida, ‘to promote sustainable and inclusive growth and create jobs’ , is well aligned to the National Development Agenda as provided for in the Uganda Vision 2040 and National Development Plan III.

“I would like to take this opportunity, therefore, to thank the government of Sweden through Her Excellency the Ambassador, for taking interest in Uganda’s development journey and providing this much-needed support at this pivotal time,” he said, adding: “Like the administered funds of the Agricultural Credit Facility (ACF) and the Small Business Recovery Fund (SBRF) currently under BoU, we are committed to ensuring that these funds achieve the objectives for which they are intended.”

He said interventions under the ACF, for example, have enabled the funding of 2,328 projects for Micro, Small and Medium Enterprises (MSMEs) encompassing both women and youth.

“As of June 2022, Shs694.92 billion (equivalent to about $180.7 million had been disbursed with 37 per cent towards working capital for the grain trade, 30 per cent for on-farm activities, 19 per cent for agro-processing and 14 per cent for post-harvest management. Through initiatives customized to our farmers like the block allocation initiative, we have managed to successfully extend the coverage of the ACF to small-scale farmers while keeping Non-Performing Loans low; thus ensuring sustainable refinancing for more projects.

Global developments over the past few years have presented unprecedented challenges, magnified by the simultaneous occurrence of these challenges. The tentative recovery in 2021 saw global growth increase to 5.7 per cent according to World Bank statistics, but this has been followed by even more gloomy developments in 2022, with the latest World Bank projections showing expected growth dropping to 2.9 per cent.

“The spillover of high global commodity prices to our domestic economy has increased transportation costs and consequently, the cost of consumer goods and services. In the agriculture sector, price pressures from inputs to production combined with low agricultural output because of a prolonged drought led to a spike in food crop prices over the past few months,” he said.

Dr Ating-Ego said the average annual food crops inflation rose from minus 7.4 per cent in November 2020 to 18.8 per cent in August 2022.

He further pointed out that the exchange rate has not been cushioned from global developments either, as capital outflows, the global strengthening of the US dollar and increased prices of imports exerted depreciation pressures on the Uganda shilling, which lost ground against the US Dollar by about 9 per cent between February 2022 and August 2022.

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