Assessing Uganda’s Fiscal and Monetary Policies in 2017 and beyond

KAMPALA (Capital Markets in Africa) – Uganda’s rate of growth, though positive, has slowed over the past few years to average 4.5 percent in the last five years compared to 7.4 percent in the preceding period. Core inflation has been in line with the target of 5 percent over the medium term, with the few deviations from the target arising largely from supply side shocks caused by developments on the global scene as well as weather related factors. The deterioration of the current account balance was partially reversed in 2016 because of a lower trade deficit. The Bank of Uganda (BOU) has continued to accumulate foreign exchange reserves which currently exceed 4 months of import cover.

To strengthen economic growth, public sector investment has been on the rise in line with the second phase of the National Development Plan (NDPII (2015/16 -2019/20) which was launched in March 2015. The theme of NDPII is ‘Strengthening Uganda’s Competitiveness for sustainable wealth creation, employment, and economic growth’. The effective implementation of the NDPII is expected to propel Uganda’s economy to an annual growth rate of 6.3 percent by 2020.

Underlying the economic strategy of the NDPII will be prudent macroeconomic policies, specifically, fiscal and monetary policies. The fiscal policy will aim at stimulating economic growth by strengthening the supply side of the economy, through the optimal use of public resources, while keeping public debt at sustainable levels. On the other hand, monetary policy will be focused on maintaining low and stable inflation.

The NDPII lays out priority activities to propel the economy to the next level -middle-income status – by 2020. Particularly, the government is focused on addressing infrastructural gaps which will have a high multiplier effect on economic growth once completed. Other priority areas include increasing production, productivity and value addition in key growth sectors; strengthening human capital development; and strengthening mechanisms for quality, effective and efficient service delivery. In a nutshell, the government will be carrying out structural reforms to improve the business environment and support private sector growth; raise per capita GDP, alleviate poverty, improve social service delivery and increase manufactured exports.

An extract from Africa’s Insurance Markets Uncovered. Please download by clicking: INTO AFRICA PUBLICATION: MAY 2017 EDITION.

Contributors’ Profiles:
Christine Asiimwe Namanya is an Assistant in charge of Macroeconomic Policy Analysis in the Economic Research Department at the Bank of Uganda. She holds a Master’s degree in Economic Policy and Planning from Makerere University Kampala and possesses 10 years’ experience in policy formulation at the central bank.