From a policy perspective, the Deputy Governor of the Bank of Uganda said financing for sustainable and inclusive growth is crucial for economic development and more important than ever.
Speaking at the signing ceremony of the Administration Agreement between Sida and the World Bank to support Uganda’s Multi-Donor Trust Fund (MDTF) – Window III “Crowding in Private Sector for jobs” , Dr. Michael Atingi-Ego said a combination of monetary and fiscal policy measures are needed to attract the private sector, build resilience in this dynamic environment and achieve a sustainable economic recovery in the future.
“Fiscal policy has, however, been tested by the adverse effects of the pandemic; which weighed on public resources due to the underperformance of tax revenues and rising indebtedness. This highlights the need for concessional funding and makes your interventions and support very timely,” he said September 27 at the Swedish Ambassador’s residence in Kololo.
Through the partnership with the World Bank, Sweden will provide funding equivalent to 124 million Swedish kronor, or approximately $11 million (Shs. 42 billion) for the next 4 years.
Dr Atingi-Ego said the objective of Sida’s support, “to promote sustainable and inclusive growth and create jobs”, is well aligned with the national development agenda envisioned in Uganda’s Vision 2040 and National Development Plan III.
“I would therefore like to take this opportunity to thank the Government of Sweden, through Her Excellency the Ambassador, for taking an interest in Uganda’s development journey and providing this much needed support at this pivotal time.” , he said, adding: “Like the administered funds of the Agricultural Credit Facility (ACF) and the Small Business Recovery Fund (SBRF) currently under BoU, we are committed to ensuring that these funds reach the purposes for which they are intended.
He said that interventions under the ACF, for example, resulted in the funding of 2,328 projects for micro, small and medium enterprises (MSMEs) encompassing both women and youth.
“As of June 2022, 694.92 billion shillings (equivalent to approximately $180.7 million) had been disbursed, of which 37% for grain trading working capital, 30% for on-farm activities, 19% for agribusiness and 14% Through initiatives tailored to our farmers like the Global Allocation Initiative, we have been successful in extending ACF coverage to smallholder farmers while keeping non-performing loans low level ; thereby ensuring sustainable refinancing for more projects.
Global developments in recent years have presented unprecedented challenges, amplified by the simultaneous occurrence of these challenges. The tepid recovery in 2021 saw global growth increase to 5.7% according to World Bank statistics, but this was followed by even gloomier developments in 2022, with the latest World Bank projections showing that expected growth drops to 2.9%.
“The impact of high world commodity prices on our national economy has increased transportation costs and, therefore, the cost of consumer goods and services. In the agricultural sector, pressures on farm gate input prices combined with low agricultural production due to prolonged drought have resulted in soaring food crop prices over the past few months,” he said. .
Dr Ating-Ego said average annual food crop inflation rose from minus 7.4% in November 2020 to 18.8% in August 2022.
He further pointed out that the exchange rate has also not been dampened by global developments, as capital outflows, the global strengthening of the US dollar and rising import prices have exerted depreciation pressures. on the Ugandan shilling, which lost ground against the US dollar by about 9% between February 2022 and August 2022.