The business tendency index gives confidence that the economy will
rebound to attain the five per cent growth target, anxiety remains high
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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
Ugandan 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.
Political uncertainty
However,
political uncertainty courtesy of the violent confrontations with
police over the age limit debate in Uganda and 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.
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