12-10-2010 14:49 Uganda
Uganda's economy to grow 8% - central bank
WASHINGTON, Oct 12 (NNN-NEW VISION) -- Uganda’s ecomony will grow at about 8% next year because of a low inflation rate, the Central Bank governor, Tumusiime Mutebile, said against International Monetary Fund’s World Economic report that forecast inflation at 6.1% next year.
Uganda’s inflation rate is currently at a 10-year historical low. “Economic growth will be more. I think it will be about 8% in 2011. Inflation will still be low. Currently, it is 0.3% and I don’t see anything in the near future to make it go up again.
“It will be below 5% and this should help growth to take place,” he said in an interview on the sidelines of the International Monetary Fund and World Bank conference in Washington DC.”
Mutebile said the low Inflation would drive more investment, which will in turn help Uganda realise more growth. Uganda’s annual headline inflation rate reduced to 0.3% in September compared to 1.7% in August.
Annual core (underlying) inflation rate, which excludes food crops, fuel, electricity and metered water, went up slightly to 4.1% in September compared to 4.0% in August.
The Central Bank targets core inflation for its macro-economic policy management. Speaking about the risks to economic growth posed by a sluggish recovery of global economic growth, Mutebile suggested that foreign aid would likely be hit as developed countries undertake fiscal adjustment.
“It will mean less aid and even remittances. Uganda must prepare to increase tax revenues to replace the foreign aid that may not come through due to these developments,” he added.
The governor noted that macro-economic stability was crucial in addition to improving foreign exchange reserves. “We should build up international foreign reserves so that we can insulate the country from shocks,” Mutebile explained.
The Central Bank has since August 2010 made daily purchases of $500,000 from the foreign exchange market to strengthen its foreign reserves.