Uganda up­beat de­spite tough eco­nomic times

Ex­perts shrug of con­cerns on credit but keep­ing a wary eye on po­lit­i­cal hap­pen­ings in Kam­pala and Kenya

The East African - - NEWS - By HALIMA ABDALLAH Spe­cial Correspondent

The Ugan­dan econ­omy reg­is­tered a slug­gish first quar­ter in spite of ef­forts by the cen­tral bank to boost credit tak­ing by low­er­ing the Cen­tral Bank Rate (CBR) to less than 10 per cent — a first in decades — of­fi­cial fig­ures in­di­cate.

Ex­perts are call­ing for more prag­matic in­ter­ven­tions to spur eco­nomic growth, not­ing that per­for­mance in the first quar­ter of the fi­nan­cial year 2017/ 2018 could have been worse if the spillover of pro­cure­ment com­mit­ments from a strong last quar­ter of the pre­vi­ous fi­nan­cial year had not helped.

Low rev­enue in­flows re­sult­ing from weak ex­ports and the ad­verse weather con­di­tions that af­fected agri­cul­tural pro­duc­tion caused col­lec­tions in the quar­ter but pro­cure­ments started to shrink in the past year and con­tin­u­ing into the quar­ter helped main­tain some sta­bil­ity.

“We are still do­ing well even when rev­enue col­lec­tions are low be­cause we still have some on­go­ing pro­cure­ments,” said Sec­re­tary to the Trea­sury Patrick Ocailap.

Both the agri­cul­ture and man­u­fac­tur­ing sec­tors have per­formed min­i­mally in the quar­ter, fur­ther weak­en­ing the shilling against ma­jor for­eign cur­ren­cies, es­pe­cially the dol­lar, and is a pointer to a tough sec­ond quar­ter as the coun­try heads into De­cem­ber.

Fi­nance Min­istry data shows that eco­nomic per­for­mance did not achieve the five per cent rate; drop­ping 1.1 per­cent­age points to 3.9 per cent.

In spite of that, the gov­ern­ment says it is meet­ing its obli­ga­tions to clear debt ar­rears, which was a ma­jor fac­tor in the fi­nan­cial cri­sis of fi­nan­cial year 2016/2017 when dis­tressed traders called for bailouts after banks threat­ened fore­clo­sures over fail­ure to ser­vice their debts.

Many said their money was locked up in gov­ern­ment debt while oth­ers were vic­tims of the con­flict in South Su­dan.

The gov­ern­ment re­leased $1.1 bil­lion to­wards debt set­tle­ment which is part of the $2.6 bil­lion it al­lo­cated to debt clear­ance. The na­tional bud­get for 2017/ 2018 stands at $7.8 bil­lion.

How­ever, po­lit­i­cal un­cer­tainty cour­tesy of the vi­o­lent con­fronta­tions with po­lice over the age limit de­bate in Uganda nd Kenya’s elec­tion re­peat could af­fect eco­nomic ac­tiv­ity, fur­ther com­pli­cat­ing mat­ters.

Al­though the business ten­dency in­dex, which gauges per­cep­tion of business own­ers in­di­cates pos­i­tive sig­nals, which fi­nance min­istry said gives con­fi­dence that the econ­omy will re­bound to at­tain the five per cent growth tar­get, anx­i­ety re­mains high.

“We are not so wor­ried about the po­lit­i­cal is­sues in Uganda. We are more con­cerned with events in Kenya which is a key trade part­ner. The Kenyan route is a risk fac­tor be­cause it af­fects our ex­ports, and col­lec­tion of im­port du­ties and our growth pro­jec­tions de­pend­ing on how the events un­fold,” said Dr Al­bert Mu­sisi, com­mis­sioner macro­eco­nomics at the Fi­nance Min­istry.

The Kenya sit­u­a­tion presents a co­nun­drum as most of the coun­try’s goods — im­ports and ex­ports go through the port of Mom­basa. The an­tic­i­pa­tion of vi­o­lence break­ing out post the re-elec­tion has made sev­eral traders to hold back ac­tiv­i­ties in fear of los­ing goods as was the case was in 2007.

“When we asked the gov­ern­ment about prepa­ra­tion for even­tu­al­i­ties dur­ing the Au­gust Kenya elec­tions, gov­ern­ment said it was pre­pared, but we see now it was not pre­pared. We ex­pect a con­tin­gency fund to off­set any set­backs. The gist of the prob­lem here is plan­ning,” said MP Akol An­thony, the shadow fi­nance min­is­ter.

In other ef­forts, gov­ern­ment is al­ready slow­ing down on sell­ing Trea­sury bills as a mea­sure to re­duce com­pe­ti­tion for credit, and in ef­fect, re­duc­ing in­ter­est rates.

Pic­ture: File

Po­lit­i­cal de­vel­op­ments in Uganda and Kenya re­main the ma­jor headache to free­ing eco­nomic growth from slug­gish­ness.

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