L-R: Emma Mugisha, Stanbic Bank Executive Director, Richard Mubiru, from Uganda Manufacturers Association, Atingi-Ego, Deputy Governor Bank of Uganda and Ramathan Ggoobi, the Permanent Secretary and Secretary to the Treasury at the Ministry of Finance taking part in a panel discussion at the Stanbic Bank – 2022 Economic Outlook Forum held at Serena Hotel on February 11.
Uganda’s economy will register progressively steady growth in the next 3 to 5 years as the country bounces back from more than two years of battling the Covid-19 pandemic which saw critical sectors such as schools close for long spells, crippling productivity and hurting incomes of millions of Ugandans.
The bounce-back assurance was provided by respected economists including Bank of Uganda Deputy Governor Dr. Micheal Ating-Ego, and Secretary to the Treasury, Ramathan Ggoobi at the annual Stanbic Economic Outlook Forum held last Friday in Kampala.
“Key service sectors like education and hospitality are going to pick up and drive economic growth,” Ating-Ego said, adding that education alone contributes 3.8% to the overall GDP of Uganda. He said, the backward and forward linkages will indirectly boost the contribution of the services sector to the overall GDP.
The other factor expected to boost recovery is the anticipated growth in external demand for Ugandan exports such as coffee expected to benefit from a resurgence of the global commodity market.
Ating-Ego also said, the accommodative monetary policy stance that the Bank of Uganda has implemented in the past months, by keeping the key policy interest rate – the central bank rate at 6.5% – too, will continue to trigger growth in all sectors of the economy.
Banking on Oil & Gas prospects
Ating-Ego also said the recently signed Final Investment Decision (FID) anticipated to bring into the economy over US$20bn worth of investment in the construction of the refinery, the oil pipeline and other infrastructure will have a multiplier effect on the economy.
“For this financial year (2021/2022) the economy is projected to grow at between 3.8 and 4.5% which we expect to accelerate to between 5 and 6% in the next financial year and improve even further to 7% in the 2024/2025 financial year,” he said.
Ating-Ego’s optimism was shared by Ramathan Ggoobi, the Permanent Secretary and Secretary to the Treasury, who said, in the coming financial years, the government will take resources to where people are (rural areas) through the Parish Model programme.
“…this will see best services also reaching people more effectively because government has been absent where people are,” Ggoobi said.
Ggoobi, who spoke with a lot of confidence about the Parish Model, said, it will involve data collection to inform government planning especially when it comes to what he called ‘area-based enterprise selection’ and organizing households into productive units like cooperatives, farmer groups and SACCOs.
“We believe these will kickstart social economic transformation. We are going to encourage more savings, credit transfers and payments,” he said.
Cautious Optimism
However, in keeping up with the Forum’s theme of cautious optimism, the Deputy Governor was quick to note that there are risks such as the uncertainty surrounding COVID-19 that could see new variants emerge and lead to new lockdowns, failure by commercial banks to extend more credit to borrowers, unsupportive weather conditions like drought that could lead to a spike in food prices and external factors like rising oil prices.
He urged government to think beyond investing in oil and gas to look at other key sectors like agriculture and green financing since oil won’t last forever.
Overall, the deputy governor said, the government plan to directly put money into the pockets of the people will be in stimulating aggregate demand and overall economic growth.
Ggoobi also expressed caution noting that the government will be more stringent as it aims at managing its public debt curve.
“Debt will never get out of hand because we are sober; in every ministry of government people are scratching their heads to manage their budgets,” he said.
He said, as of June 2021, Uganda’s debt to GDP ratio was 47%, it is projected to rise to 51.6%, 52.4% in 2022, 2023 respectively before declining to around 50% in 2024/25.
In general, government will adopt a new strategy of borrowing to fund development/infrastructure projects, and that tax revenue will fund the other areas in the budget in the coming financial years.
Reactions
Jibran Qureishi, the Head Economic Research at Standard Bank said, unlike the infrastructure development model, the government’s Parish Model is likely to lead to financial inclusion and contribute positively to social economic transformation.
“The government’s move to reallocate resources to key development areas like agriculture is good news and will supplement other private and development sector initiatives to deliver tangible positive impact,” he said.
Richard Mubiru, a director at the Uganda Manufacturers Association said the government should work towards reducing the cost of doing business, enhancing exports, and ensuring that economic integration works.
Patrick Ayota, the Deputy Managing Director at National Social Security Fund (NSSF) said, their plan is to start implementing mid-term access (in line with the new National Social Security Fund Law) in March this year. He said, a total of 100, 000 members qualify to access their savings under this arrangement amounting to approx. Shs900bn. “Once that money is injected into the economy aggregate demand might be higher and impact on price stability,” Ayota said.
This year’s economic forum was attended by approx. 700 people from the private sector, civil society, government, and academia both physically and virtually; with a high-level panel of economic thought leaders moderated by Emma Mugisha, the Executive Director at Stanbic Bank Uganda.
Stanbic Bank Uganda organises these annual Economic Forum at the start of every year bringing together thought leaders to put in context factors that are likely to drive economic activity and growth in a particular year to help guide informed investment decisions by the bank’s clients.
