Ugandans Feel Financial Squeeze as Growth Slows

If the economic pinch stung last year, the pain will be more this year as the Bank of Uganda says growth will be lower than last year’s.

Ugandans will continue experiencing a financial squeeze as the economy continues to struggle to regain its footing, the Bank of Uganda has said. Governor Emmanuel Tumusiime-Mutebile told reporters last week that the earlier projected 4.5% growth for this year will not be achieved, AllAfrica reported.

“Given the weak economic performance in the first two quarters of the current financial year, the projected GDP growth of 4.5% in 2016/17 is unlikely to be achieved,” Mutebile said. This means the economy has performed worse than the last financial year where it grew by 4.8%.

This poor performance has been driven mainly by the prolonged drought, which has affected agriculture, where three quarters of Ugandans earn a living. The agriculture sector contracted by at least 2% between September 2016 and March 2017, according to BOU.

The country depends heavily on agriculture, relying on rainwater. President Museveni’s current crusade of promoting drip irrigation is not expected to transform the agriculture sector from the predominant subsistence farming to commercial, which needs a reliable water source.

BOU deputy governor, Louis Kasekende, said the economic recovery would have been faster if there were swift changes in the way people are farming to use improved methods. Outside agriculture, the signs of a poor economy are seen in all corners. Key retailer Nakumatt has shut its Katwe branch on poor sales while other stores remain with near empty shelves.

There is another indicator: a drop in the importation of raw materials and capital goods. Capital goods, such as machines which are needed in production, account for 70% of Uganda’s imports.

The low imports, however, saw trade deficit, measured by the goods imported vis-a-vis exported, reduced by 13%. Exports performed a little better, with coffee receipts going up, owing to improved international prices. Gold from the region reexported via Uganda also grew.