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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 .