22.
BoU lowers rate to boost economy
Given that core inflation is forecast to remain around the medium-term target of five percent and in line with efforts to support private sector credit and economic growth momentum, Bank of Uganda( BoU) believes there is scope to continue easing the monetary policy
By Athanasius Lupatu
In a bid to spur growth and allow flow of liquidity into the country, Central Bank of Uganda has further lowered its Central Bank Rate( CBR) this year to 11 percent. The CBR decreased by 0.5 percentage points compared to that of February which was recorded at 11.5 percent. The Governor of Bank of Uganda, Prof. Emmanuel Tumusiime-Mutebile made the announcement following the release of the Monetary Policy Statement for April 2017 in which he indicated there was a need to ease the monetary policy to help boost the economy.“ Given that core inflation is forecast to remain around the medium-term target of five percent and in line with efforts to support private sector credit and economic growth momentum, Bank of Uganda( BoU) believes there is scope to continue easing the monetary policy.” said Prof. Mutebile. The five percent inflation target is an improvement from the last Monetary Policy Committee meeting and was mainly due to the relatively stable
MAY 2017
exchange rate. As of April 20th, the dollar traded at 3,558.6 against the Uganda shilling and there has been very minimal fluctuation recorded. This stability has offset some of the negative price impact of the supply side shock. Annual food crop inflation, on the other hand, has continued to rise increasing to 20.7 percent in March 2017 from 18.8 percent in February 2017, as a result of the drought that affected food production in many parts of the country. BoU however forecasts that the core inflation will still remain at five percent during the course of the year. Looking at the economy as a whole, Gross Domestic Product( GDP) data released by Uganda Bureau of Statistics at the end of March 2017 indicates that the economy grew by 0.8 percent( q-on-q) in the quarter to December 2016 compared to a contraction of 0.1 in the quarter of September 2016. BoU recorded weak economic performance in the first two quarters of 2016 / 2017 and noted that the projected 4.5 percent in 2016 / 17 is unlikely to be achieved. The anticipated lower growth in financial year 2016 / 17 was largely driven by the impact of adverse weather conditions on agriculture output. The sector contracted on average by about two percent q-on-q for four consecutive quarters to the second quarter of 2016 / 17. Although the central Bank has been putting in much effort into lowering the CBR to spark growth, stakeholders in Uganda’ s financial sector are sceptical that reducing lending rate alone is enough to solve the private sector credit crunch. They have called on the government to also look at the infrastructure and legal framework in place.
Powering Africa’ s Transformation
CAPE TOWN / LAGOS – Africa has a bright future ahead of it. Productivity and growth will improve as African economies continue to place more emphasis on services and manufacturing, pursue commodity production, and achieve quick gains in agriculture and light industry. But African countries’ success presupposes that they generate and manage energy sustainably to keep up with increasing demand. In the next 35 years, Africa’ s population will continue to rise, with a projected 800 million people across the continent moving to cities. And Africans are already disproportionately exposed to the adverse effects of climate change, even though they are collectively responsible for less than 4 % of global greenhouse-gas emissions. Urban areas will have to reduce environmental stresses by promoting low-carbon energy systems, electric mass transportation, and energy-efficiency initiatives, as well as the use of cleaner cooking fuels. And rural areas can create new opportunities that reduce the need for urban migration, by expanding renewable energy systems and energy access. But even with these measures, providing enough energy for a modern, inclusive economy will not be easy. Africa already experiences frequent power outages, even though more than 600 million people there do not have access to electricity, and current demand is relatively modest. To avoid the harmful spillover effects of high-carbon economic growth, Africa will have to undergo a“ climate smart” energy revolution. African countries will need to build climate-resilient infrastructure and tap into the continent’ s abundant renewable-energy resources. Doing so will broaden access to energy, create green jobs, reduce environmental pollution, and enhance energy security by diversifying sources. At the same time, Africa’ s energy revolution will itself be challenged by some of the worst effects of climate change. For example, as rainfall becomes more erratic, hydropower production and revenues may decline. This risk can be managed by modifying existing investment plans to account for large climate swings. Still, for the region to adapt, the United Nations Environment Programme estimates that it will need annual investments of about $ 7-15 billion by 2020, and $ 50 billion by 2050. Rather than treating climaterisks as to should new sources”. related hurdles
overcome, we view them as opportunities for investment and innovation. We are standing on the threshold of an exciting new era in which technological progress allows us to use a range of conventional and unconventional energy options( excluding nuclear energy). African countries can now combine energy sources to adapt to realities on the ground. Unlike in past decades, they no longer need be tied to a single energy source. And, because much of Africa’ s energy infrastructure remains to be built, governments have a chance to get their energy and infrastructure policies right the first time, thereby maximizing returns on
“ Innovative off-grid and minigrid electricity-distribution systems, meanwhile, are already transforming Africa’ s energy landscape and multiplying the ways to exploit cleanenergy sources and expand electricity access for the poor, particularly in areas where consumers are widely dispersed. Companies such investment. Policymakers should take a few key steps to help transform Africa’ s energy sector and boost long-term economic growth. For starters, making it easier, safer, and more financially attractive for private investors to enter power markets would boost competition, thereby spurring innovation and as M-kopa and Mobisol have made small solarenergy systems available to thousands of African homes, by allowing their customers to pay in installments on their mobile devices. Still, to accelerate a market shift on the scale that Africa needs will require increased financing from export credit agencies, development banks, commercial financial institutions, and other cross-border lowering costs. Moreover, African countries should seek opportunities to share infrastructure and create cross-border power pools. Another important step is to invest in renewable energy. Africa has an exceptionally rich portfolio of clean-energy assets, including almost nine terawatts of solar capacity, more than 350 gigawatts of hydropower capacity, and more than 100 GW of wind-power potential. This is more than enough to meet the continent’ s future demand. At the same time, renewable-energy sources are becoming less expensive, making them increasingly competitive with fossil-fuel alternatives. For example, the price of utility-scale photovoltaic solar energy in Africa fell by 50 % between 2010 and 2014, and continues to decrease today. And South Africa’ s Renewable Energy Independent Power Producer Procurement
Programme has seen an overall decline in bid prices and oversubscription rates. Innovative off-grid and mini-grid electricity-distribution systems, meanwhile, are already transforming Africa’ s energy landscape and multiplying the ways to exploit clean-energy sources and expand electricity access for the poor, particularly in areas where consumers are widely dispersed. Companies such as M-kopa and Mobisol have made small solar-energy systems available to thousands of African homes, by allowing their customers to pay in installments on their mobile devices. Still, to accelerate a market shift on the scale that Africa needs will require increased financing from export credit agencies, development banks, commercial financial institutions, and other crossborder sources. Africa has a chance to bring hundreds of millions of people without electricity into the modern economy; and we have an opportunity to pioneer the next investment frontier. Getting Africa’ s energy transformation right, by pursuing a mix of policies and investments that boost diversity and strengthen resilience, will ensure a brighter future for us all.
Carlos Lopes, former Executive Secretary of the United Nations Economic Commission for Africa, is a Professor at the University of Cape Town and a visiting fellow at the Oxford Martin School, University of Oxford.
Aliko Dangote, Founder and Chief Executive of the Dangote Group and Chairman of the Dangote Foundation, is the Co- Founder of the African Energy Leaders Group.
Tony Elumelu is Chairman of Heirs Holdings and United Bank for Africa( UBA), founder of the Tony Elumelu Foundation, and Co-Founder of the African Energy Leaders Group.