Uganda to post highest growth in the region - IMF

Two weeks to the signing of the Common Market Protocol, East Africa’s economic growth is projected to recover following a bumper food harvest in Uganda and prudent economic policies that have helped the region reduce its public debt.

Experts say Uganda could register the highest growth in the region after the drought that hit Kenya and Tanzania.

“The regional drought, while devastating for some of Uganda’s neighbours, has boosted Ugandan exports of food offsetting some weakness in external demand for traditional exports such as coffee,” says Martine Guerguil of the International Monetary Fund.

Ms Guerguil says the recent high level of headline inflation was driven by drought that resulted in high food prices in East Africa.

She however says the continued decline in core inflation, which does not take into account the impact of food and energy prices, is a testimony that central banks in the region are implementing appropriate monetary policy frameworks.

Kenya’s economic growth, which had fallen to less than two per cent following post-election violence and global economic crisis, is projected to go up to 2.7 per cent by the end of the year.

Uganda’s economy is expected to taper off slightly from early this year’s growth of 7.1 per cent to 6.3 per cent at the end of the year.

It is however projected to rebound to above seven per cent in the coming years.

“The Ugandan economy is weathering the impact of the global financial crisis better than expected. Despite a slowdown in growth, economic activity has remained strong with real gross domestic product growth. Nevertheless, there are downside risks to the outlook, largely related to the uncertain prospects of the global economy, as well as the regional security situation.” Ms Guerguil said.

To ensure that the region’s economic growth is enhanced, the IMF says East African governments should invest more in infrastructure and strengthening of public financial management to increase spending efficiency.

In addition, the region has been urged to deepen its legal and institutional reforms to allow the domestic financial market to operate more efficiently.

But all is not lost in Kenya’s relative slow growth.

The Fund says the country’s policy response to the crises was “appropriate and timely.”

It points out the prudent economic policies that helped reduce public debt as a share of GDP.

“Kenya had the necessary space to ease fiscal policy and help sustain domestic demand in the face of slowing economic growth. The Central Bank of Kenya adhered to its monetary target and given the weakening demand for private sector credit, short term interest rates declined, contributing to an easing of budgetary pressures on domestic debt service.”