Economic growth in Uganda is likely to strengthen significantly next year as inflation eases, allowing the authorities to relax monetary policy, the International Monetary Fund said on Tuesday.
The IMF forecast that the country’s growth could reach 6 percent by 2013/14 and climb to 7 percent by 2014/15. Tighter monetary policy and weaker global demand are seen weighing on Ugandan growth this year, the Fund said.
In April, the IMF said 2012 growth would reach 4.2 percent.
“Economic growth should recover significantly next year, as the expected decline in inflation will allow a phased and gradual relaxation of the monetary policy stance and a recovery of credit growth,” the IMF said in a statement.
The Fund said prices in Uganda have been stable for the past few months and annual inflation rates were falling.
Uganda’s central bank cuts its key lending rate by 100 basis points to 20 percent on June 1, citing a steady easing of price pressures.
It said while external borrowing by Uganda was set to increase, IMF and World Bank analysis found that its debt would remain at sustainable levels.
The IMF said, however, that slower-than-expected global growth was a risk to Uganda’s economic outlook because it would worsen the trade deficit and possibly reduce worker remittances and capital flows.