Uganda's economic growth is expected to slow this year, as the east African country tightens its fiscal and monetary policies, and due to the effects of a global slowdown, the International Monetary Fund said. The IMF also said in a statement late on Friday that rapid disinflation was needed to restore macroeconomic stability.
Uganda's year-on-year inflation rate went down to 27 percent in December from 29 percent a month before and from an 18-year high of 30.5 percent hit in October, as food prices fell. Also in December, the central bank kept benchmark lending rates unchanged at 23 percent and said inflation had probably peaked, while analysts said borrowing costs were unlikely to drop for several months.
"The Ugandan authorities have appropriately tightened monetary policy to help reverse the acceleration in inflation over the past nine months, in light of increasing evidence that external events have spilled over into underlying domestic inflation," IMF said. "Growth is likely to slow in 2012 in light of tighter policies combined with a weaker global growth outlook. However, rapid disinflation is critical to restore the stable macroeconomic environment."
The IMF forecasts Uganda's economy will grow by 5.5 percent this year, down from 6.4 percent in 2011. The country discovered hydrocarbon deposits in 2006. Investor interest in the east African economy has been lifted by the discovery and the government says oil will potentially propel annual GDP growth rates to double digits once production starts.