Mutebile warns of Tough times ahead amidst COVID19 pandemic
Emmanuel Tumusiime Mutebile – Governor Bank of Uganda has advised Ugandans to prepare for tough times ahead, should Government declare a second lockdown due to the COVID19 pandemic.
“Although Uganda is gradually easing the lockdown measures instituted to contain the spread of the pandemic, the adverse consequence of the global and domestic supply chain disruptions could persist through the remaining part of 2020,” said Mutebile.
Appearing before the Parliamentary Committee on National Economy on Thursday 18th June 2020, Mutebile said that the economy had been affected and it would even be greatly be affected if COVID19 persists longer than expected.
“Disruptions to activity would weaken businesses’ ability to remain operational and service their debt, while the increase in risk aversion could raise interest rates for higher-risk borrowers.”
The Governor noted that whereas the measures put in place by Government following the COVID19 pandemic were largely intended to slow down, its adverse effects have precipitated an unprecedented collapse in oil demand, a surge in oil inventories and in March 2020, the steepest one month decline in oil prices on record.
Mutebile further highlighted that in April 2020,
Bank of Uganda projected that the GDP growth for FY 2019/20 would decline to the range of 3 -4 % on account of the adverse effects of #COVID19 Pandemic. He said that indeed, the recent preliminary estimates by Uganda Bureau of Statistics (UBOS) projects that the GDP growth slowed down to 3.1 % FY 2019/20 down from 6.8 % in FY 2018/19.
On the impact of COVID19 on the balance of payment, the Governor said that the FY 2019/20, export earnings are projected to decline by 4.3% compared to the initial projections. Likewise, the import bill is projected to decline by 8.2%. In the same vein, tourism receipts are projected to decline by 32.4%.
The Governor was, however, quick to warn that Uganda’s rising debt levels coupled with low tax revenues amid COVID19 would leave devastating effects on the economy.
“Although the multilateral creditors have put in place facilities to dampen the adverse effects of COVID19 pandemic, uncertainties relating to ensuring expenditure pressures, subdued economic activity, and declining tax revenues and a possible further decline in grants could lead a further borrowing on non-concessional terms,” Said Mutebile.
The Governor in his concluding remarks indicated that Uganda is being faced with unprecedented challenges from the health, macroeconomics, and social effects of the pandemic, and therefore to limit the harm, it’s important to maintain macroeconomics stability, secure core public services, maintain a Private Sector.