But Central Bank Remains Confident
By Samuel Egadu
Uganda's economy growth is projected to drop to 6.3 per cent for the 2009/2010 financial year ending in June from a revised 7.1 per cent the previous year due to effects of global financial crisis, says a Central Bank official. "Overall, real gross domestic product turned out to be 7.1 per cent in the financial year 2008/09 and is projected at 6.3 per cent for this financial year, 2009/10," said Louis Kasekende, the deputy governor, Bank of Uganda, in a February briefing.
"Despite the economic slowdown, this performance remains remarkable given that the International Monetary Fund projection for Sub Saharan African region is only 1.5 per cent for 2009 and 4. 3 per cent for 2010," he said. On the account of the prudent macroeconomic management, the Ugandan economy has remained resilient in the face of the global financial crisis, which later culminated into a global economic downturn.
The effects of the global economic downturn on the Ugandan economy were evident with a sudden exit of offshore players. The balance of payments was adversely affected through reductions of export earnings in some sectors, portfolio flows, interest income on offshore investments and remittances.
The Central Bank responded by letting the economy adjust to these exogenous shocks through the flexible exchange rate policy. "Bank of Uganda will continue to pursue a momentary policy stance aimed at boosting aggregate demand and growth while maintaining price stability," said Kasekende. "The recovery of the balance of payments is now being observed. There is now stability in the financial markets and rapid reduction of inflation," said Kasekende.
The Bank of Uganda intends to introduce major reforms to the monetary policy in the next five years, which will include shifting to an inflation targeting regime as well as the transition to a single currency in the East African Community (EAC), he said.The negotiations for the adoption of monetary union among the five EAC member states that include Uganda, Rwanda, Burundi, Tanzania and Kenya is going on
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