Whenever President Museveni talks about the economy in his now regular COVID-19 addresses, he dismisses the wide public belief that the Ugandan economy is going to be, or has already been affected by the COVID-19 pandemic. He paints the picture of an economy that is going to grow even bigger.
While that is coming from the fountain of honour, the Central Bank, Bank of Uganda (BoU) seems to disagree, according to the April 2020 Monetary Policy Report that has been released this morning.
The report predicts nothing but uncertainty, and it is all based both directly on COVID-19 and its effects on both international and domestic trade and travel. It is true, economies of countries around the world have been hit hard, and given the fact that the world is now a global village, what happens in one corner of the world will directly or indirectly have an effect in the other corner.
In the report, BoU has predicted that the COVID-19 pandemic is “likely to worsen Uganda’s external position, through its adverse effects on the flow of international trade, tourism, workers’ remittances, Foreign Direct Investment (FDI), and loan disbursements.”
This is because Uganda currently sources about 40 percent of its import requirements from Asia, with china supplying about 15 percent of Uganda’s total imports. A decline in imports could imply a shortage of supply of consumer goods and inputs, which could lead to an increase in prices; closure of small businesses that largely depend on Chinese imports; a decline in government revenue, which could hurt the already low government revenue.
The decline in imports from China, which BoU projects to be at 4 percent, will have profound implications, not only for domestic consumers and government, but also for the manufacturing sector that heavily relies on imported inputs from China.
President Museveni in his addresses to the country has persistently encouraged local manufacturers to boost their production in order to fill the gap left by imports, but they will still need inputs, most of which are imported.
Read the full report here: