As the global financial crisis appears to be severing among industrial countries, the outlook of Uganda's economy remains positive and strong, an official said in Kampala on Tuesday.
Ugandan Finance Minister Syda Bumba told MPs that despite the global crisis, the government policy framework and overall economic fundamentals remain strong and sound respectively.
She also said the limited integration of the Ugandan economy into the global economy has provided the safety net."Although many economies in the world, including Africa, have been adversely affected by the global economic recession, Uganda's economy still remains strong," Bumba said while presenting a paper to Parliament on global economic crisis.
She said there are both regional and domestic opportunities which are mitigating the negative effects of the decline in global demand.
Despite the fall in demand in advance economies in the world, the minister said Uganda's overall export receipts have continued to grow, saying the total export earnings for the first half of 2008/9 financial year increased to 1,249.5 million U.S. dollars from 1.229.6 million dollars recorded the previous year.
The country's banking sector remains sound and stable as the capital adequacy ratios of all banks in the country are well above the regulatory requirements.
She said Bank of Uganda international reserves currently stand at 2.2 billion dollars and are sufficient to cover over five months of imports of goods and services in the country."Although Uganda is a home to subsidiaries of international banks, the local subsidiaries had no exposures to the sub prime products or toxic assets," she said.
In the fiscal sector, the minister said although collection by Uganda Revenue Authority (URA) grew at a rate of 15.4 percent between July 2008 and February 2009, it was below the budgeted projection of 22 percent, recording a shortfall of 108 billion Uganda shillings (about 51.4 million dollars).
Uganda's economy has grown at an average of 7.4 percent per annum for the last five years, reaching an annual Gross Domestic Product (GDP) growth rate of 8.7 percent in the financial year 2007/8.
Meanwhile, the inflation has in the last three quarters of financial year 2008/9 has averaged at about 14.5 percent.To boost export to regional markets, the government has allocated about 17 million dollars to agricultural sector to increase food production and to address the constraints to access to the export markets.
Meanwhile, a credit guarantee scheme is being introduced to underwrite the risk of people involved in commercial agriculture in order to encourage commercial banks to provide credit.
In addition, the government is providing the fiscal stimulus through road construction and other infrastructure including information technology with a view of creating jobs.
On macroeconomic policy, the minister said due to uncertainty of how long the financial crisis will last, the government is taking precautionary measures to preserve the foreign exchange reserves and be vigilant in the supervision of the banking sector.