Kampala – The Bank of Uganda has, on Monday, April 6, released a monetary Police statement – sanctioned by the Governor Emmanuel Mutebile – on the nation’s economy during the COVID-19 pandemic affirming the economy will not fall apart as castigated by critics.
In the April 2020 Monetary Policy Committee (MPC) meeting held Monday, April 6, the Central Bank reduced the Central Bank Rate (CBR) to 8% citing a severe contraction in economic activity due to a combination of global supply chain disruptions, travel restrictions, measures to limit contact between persons, and the sudden decline in demand.
“Consumer-facing sectors have been severely affected by social distancing measures and heightened uncertainty, while the manufacturing sector has declined on account of disruptions to the inflow of raw materials,” read part of the statement.
The Central Bank further disclosed that Uganda’s economy was projected to slow down drastically in the second half of the 2019/2020 financial year with GDP growth projected at 3 – 4percent and auspiciously projected a gradual recovery in 2020/2021 fiscal year.
“Although GDP growth is projected to gradually recover in the second half of FY2020/21, the emerging output gap is projected to persist until 2022. However, there is significant uncertainty over the depth and duration of the current slowdown,” Governor Mutebile.
On inflation, the Central Bank affirmed that the inflation rate was average, with Food crops inflation snowballing.
“Headline inflation declined to 3.0 from 3.4 percent in February 2020, while core inflation declined to 2.5 percent from 3.1 percent. Energy Fuel and Utilities (EFU) inflation declined to 7.7 percent from 8.0 percent in February 2020, while food crops inflation increased to 2.5 percent from 1.3 percent,” Mutebile explained
Central Bank Governor – in the statement – acknowledge the deterioration in macroeconomic conditions disclosing that the Central Bank has decided to ease the monetary police to ensure adequate access to credit and the normal functioning of financial markets.
“Consequently, the CBR has been reduced by 1 percentage point to 8 percent. The band on the CBR will remain at +/-3 percentage points and the margin on the rediscount rate and bank rate will remain at 4 and 5 percentage points on the CBR, respectively. Consequently, the rediscount rate and the bank rate will be 12 percent and 13 percent, respectively,” Mutebile deliberated.
In efforts to curb the spread of the deadly coronavirus, government issued guidelines that saw the ban on public and private transport, closure of businesses and markets, travel restriction, among others thus exposing the economy to a drastic decline in transactions and market operations.