Bank of Uganda has pressed ahead with its easing of monetary policy stance by reducing the Central Bank Rate from 11.5 percentage points in February 2017 to 11 percentage points in April 2017 to boost economic activities.
Presenting the monetary policy statement for the month of April 2017, the Governor of the central bank, Professor Emmanuel Tumusiime-Mutebile said: ” Given that core inflation is forecast to remain around the medium-term target of 5 percent and in line with efforts to support private sector credit and economic growth momentum, Bank of Uganda (BoU) believes that there is scope to continue easing monetary policy”.
According to Professor Mutebile The latest quarterly Gross Domestic Product (GDP) data released by Uganda Bureau of Statistics (UBOS) at the end of March 2017 indicates that the economy grew by 0.8 percent (quarter-on-quarter) in the quarter to December 2016 compared to a contraction of 0.1 percent in the quarter to September 2016. He further states that given the weak economic performance in the first two quarters of the current financial year (FY), the projected GDP growth of 4.5 percent in 2016/17 is unlikely to be achieved.
Comparing the current Bank of Uganda’s monetary policy with the one in the previous months, professor Mutebile said: “The anticipated lower growth in FY 2016/17 is largely driven by supply side factors, notably the impact of adverse weather conditions on agricultural output”.
“The agricultural sector contracted on average by about 2 percent quarter-on-quarter for four consecutive quarters to the second quarter of 2016/17, Output should revert to trend once the supply shock has dissipated. On the external side, the current account has improved because of stronger export proceeds and workers remittances, coupled with weak import growth” he said.
Professor Mutebile said that The stability of the shilling exchange rate and subdued domestic demand have contributed to the dampening of inflationary pressures.