UGANDA, Kampala | Real Muloodi News | Looking back on 2021, economic analysis shows a somewhat positive recovery compared to the year prior, which was plagued by COVID-19 pandemic restrictions. This is according to the Ministry of Finance annual report on the current and projected state of the economy as at June 30, 2021.
In spite of the challenges stemming the COVID-19 pandemic, the Uganda’s resilient economy expanded by 3.4 per cent during FY2020/21. This is an increase of 0.4 per cent compared FY2019/20. In nominal terms, the economy expanded to an estimated Shs148trillion in FY2020/21 from Shs139.7 trillion in FY2019/20.
According to Government officials, the growth can be attributed to the easing of some of the pandemic-related measures, coupled with fiscal and monetary policy interventions implemented to support the recovery in economic activities in the face of the pandemic during FY2020/21.
These Government interventions included making funds available to boost lending to small and medium enterprises at affordable rates, rescheduling loan obligations of financially strained debtors and settlement of verified domestic arrears owed to the private sector.
Fiscal stimulus measures that were put in place include social safety net programs to cater for the vulnerable groups within the population, increased funding to micro credit institutions, as well as for initiatives on wealth and job creation (Emyooga).
Annual headline inflation remained low and stable, averaging 2.5%, which contributed to the central bank’s decision to maintain an accommodative monetary policy stance to bolster economic activities.
The central bank’s policy rate rate was reduced from 10 per cent in the FY2019/20 to a record low of 7 per cent in July 2020 and 6.5 per cent in June 2021.
Subsequently, commercial bank lending rates declined from an average of 20.9 per cent in July 2020 to 17 per cent in June 2021, which contributed to a growth of 7.1 per cent in private sector lending.
The shilling appreciated by 1.4 per cent from an average of USh 3,714.6 per US$ in FY 2019/20 to USh 3,661 per US$ during FY 2020/21, as stronger inflows from offshore investors, budget support and export earnings countered low demand. The exchange rate experienced appreciation pressures but remained relatively stable.
Meanwhile, Uganda’s exports grew by 38.8 per cent in FY 2020/21, following a dismal performance in FY 2019/20 which saw -4.1 per cent.
Looking forward to 2022, experts say sustaining Uganda’s resilient economy will require effective containment of the spread of the COVID-19 virus, over which the Omicron variant is casting a dark shadow. As Government works towards the goal of fully re-opening the economy in January next year, vaccinating a significant percentage of the population will be a priority.
Improving the efficiency and effectiveness of implementation of public investments, rationalisation of Ministries, Departments and Agencies combined with a recovery in external and domestic demand is expected to further boost economic activities, with growth projected to gradually increase and average between 6 to 7% in the medium to long term.
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