- According to the latest analysis of the Ugandan economy, the country's strong growth may halve this year due to the global crisis. However, growth is still sustainable in 2009.
This was revealed in the latest analysis by the International Monetary Fund (IMF). "After several years of high growth and strong macroeconomic performance, the global financial crisis is now constraining economic activity in Uganda," IMF officials found.
Economic growth was expected to slow to 5-6 percent in 2009, down from an impressing average of 9 ½ percent over the past three years, according to the IMF analysis. This almost represents a halving of Uganda's growth perspectives.
The Fund's analysts nevertheless found that the economic situation in Uganda remained healthy and that government was still able to meet its spending plans without accumulating too much debt. Economic growth is still slightly above population growth, representing a real growth for Ugandans in 2009.
"The banking system remains sound and well capitalised and strong fundamentals and continued prudent macroeconomic policies should enable Uganda's economy to absorb the slowdown in growth without major macroeconomic stress," the IMF analysis said.
The Fund therefore saw no necessity to change or expand its lending policies towards Uganda at these crossroads. Uganda is currently receiving IMF funding through a three-year so-called Policy Support Instrument (PSI), which provides the government with general budget support funds.
According to the IMF's latest update of its World Economic Outlook, economic growth in 2009 may still reach 6.2 percent, but will probably slide further down to 5.5 percent in 2010. More worrying for Ugandan consumers, consumer prices are expected to grow at a faster paste, even by 13.7 percent this year, meaning that purchase capacity may sink for ordinary Ugandans.
The IMF's Martine Guerguil recently explained the reasons for Uganda's reduced growth perspective. "The effects of the crisis are starting to be felt in lower export growth, a decline in foreign capital inflows, depreciation of the shilling as well as lower tax revenue collections," she noted.
She also emphasised that "the fundamentals of the Ugandan economy remain strong, in good part thanks to the sound macroeconomic policies that have been pursued in recent years." Only minor policy changes by the Kampala government were needed to meet the crisis, Ms Guerguil held.
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