Kampala — Economic growth is set to edge up in the next fiscal year to 6.2% from 5.7% in 2013/2014 the Governor, Bank of Uganda Emmanuel Tumusiime Mutebile said recently.
"Stronger aggregate demand growth will be driven by a more expansionary fiscal stance and by continued recovery of private sector spending," he said. He was officially opening the newest Standard Chartered Bank branch in Kampala.
He said prospects for the macroeconomic policy in 2014/2015 are reasonably promising for the banking sector and the wider business community.
The Governor appreciated the rapid growth in the number of commercial bank branches. He said it's a reflection of the resilient future prospects for the banking market in Uganda. This in turn reflects the industry's confidence in the continued strong growth and modernization of the economy.
Mutebile said faster economic growth should support a recovery of loan demand from the private sector, which has been fairly weak during the last three years.
He said growth of bank lending to the private sector will accelerate to about 15% in the next fiscal year compared to around 12% in the current fiscal year.
Besides that, Mutebile said the government will need to raise over Ush1.4 trillion from the domestic market through treasury bills and bonds to finance its budget the next fiscal year.
"The projected growth in the financial systems and its resource base should be sufficient to accommodate both government and domestic borrowing requirements and faster growth in the credit to the private without pushing interests up." he said. He said inflationary pressures are currently under control, but added some caution.
"The annual core rate of inflation was only 3.3 percent in May. However, we don't expect inflation to remain quite low over the course of the next fiscal year," he said.
Mutebile said, BOU's 12 month forecast for core inflation is in the range of 5% to 6%. He said inflationary pressures will be stronger next fiscal year, because of the need to strengthen domestic demand and depreciation of the nominal exchange rate
"Since February, the exchange rate has depreciated by 6% against the US dollar. Nevertheless given the open characteristics of our economy and its substantial dependence on imports, the depreciation will have impact on domestic prices," Mutebile the invited guests in Kampala.