IMF warns Uganda on economic risks

A trader displays Uganda Shilling notes. IMF says there is likelihood of exchange rate depreciation as has already been observed in South Africa, Nigeria, Ghana and Zambia. Photo/FILE 

By Daily Monitor

In Summary

• IMF says risks facing Uganda/sub-Saharan countries from external environment are slower economic growth in large emerging market economies, lower prices for key commodities for the region in global market and tighter global financial conditions which have also raised the cost of financing for many countries.

The International Monetary Fund (IMF) has warned Uganda and sub-Saharan African countries that their economies are facing downside risks from both domestic and external environment, which are likely to impact negatively in health of economies despite high growth that has been projected for this year.

In its Regional Economic Outlook report released in Kampala last week, the IMF say the risks sub-Saharan Africa is facing is that the favourable factors that have supported growth in the region in the past have started to weaken.

In particular, the IMF says risks facing Uganda/sub-Saharan countries from external environment are slower economic growth in large emerging market economies, lower prices for key commodities for the region in global market and tighter global financial conditions which have also raised the cost of financing for many countries.

Presenting the report at Statistics House last week, the IMF deputy director African department, Dr Abebe Aemro Selassie cautioned that should these trends continue they will likely act as a drag on growth for countries.

Tighter global setting

The tighter global financial setting is affecting countries from around the world in form of an increase borrowing cost (high interest rates).

“This global effect is already negatively impacting on the region. There are a lot of uncertainties on how interest rate is going to be in the world financial markets due to monetary policy actions in the US,” he said.

Closely linked to the financial system, Dr Abebe said, is the likelihood of exchange rate depreciation as has already been observed in South Africa, Nigeria, Ghana and Zambia.

Local effects

At the domestic level in African economies, the IMF deputy director African department, Dr Abebe Aemro Selassie, said fiscal deficits and large current account deficits are of great concern.

He said the current deficits situation in African economies points to rising public spending while tax ratio to the Gross Domestic Product is declining