Uganda’s growth in 2014 will depend on macroeconomic policies

January 13, 2014

Respected Bank of Uganda Governor Emmanuel Mutebile was last year quoted as saying that the economic prospects for Uganda will improve once taming of inflation to single digits is achieved. Credit to his policies, that target was met and the pearl of Africa is expected to grow by more than six per cent this year. According to experts in the country, Uganda needs to manage macro-economic more intelligently. For example, the national government can print money and borrow as long as other nations are willing to lend and they can print as much as they need or want except when citizens and other nations will no longer accept that money. In macro economic as long as others will still accept the money or others will still lend you more money is acceptable.  Bank of Uganda defines macro economic objectives as growth, full employment, and price stability. In its own words, the Bank of Uganda objective is to have jobs for every Ugandan who wants to work, to grow the economy so everyone in the country progressively has better living standard as well keeping the price of goods sufficiently stable. In order to obtain these, there is need for Uganda fiscal policy and monetary policies to be managed accordingly. There are two ways for Uganda to achieve growth either through domestic savings that are turned into investments or through having export accounting for greater revenue than imports cost which unfortunately is not the case.

IMF has cited fiscal policy as more fundamental and simpler to understand while EU which funds various government projects has repeatedly said that monetary policies in Uganda are more sophisticated and less transparent compared to fiscal policies hence the need to balance the two. The recently proposed East African monetary union will mean that all member states namely Kenya, Uganda, Tanzania, Rwanda and Burundi will forfeit their right to print money as they want. There will be advantages for Uganda to belong to the East African monetary union and the East African currency which has to be balanced with the lack of autonomy in managing the liquidity of Uganda and therefore unemployment. Before the monetary union comes into effect in the next ten years, Uganda can meanwhile just printed more money to preserve employment and cut down unemployment. Every government in this world has a primary responsibility to ensure that everybody has a job and that is the primary goal of macro economic. The late former British premier Baroness Margaret Thatcher – said at the height of union strikes in northern England in 1980s that the time lost by a person who wants to work but idle because of being jobless can never be recovered. That is why technocrats in Uganda need to formulate policies that can minimize the unemployment levels in the country. Uganda has not yet fully utilized its natural resources and organized local manufacturing as many would have wished but millions of ‘pearl of Africa’ nation are looking forward to 2014 of satisfactory growth and many hope that the government will continue to work on income distribution and elimination of poverty in a country of 35 million people.

Contador Harrison