Increase in inflationary pressures
Aeko Ongodia, a renowned Charted Finance Analyst, founder and CEO of Xeno Technologies, an investment management company told The Independent that inflation is expected to increase as campaigns gather steam.
“We are likely to see an increase in money circulation chasing very few goods as politicians increase their expenditures to woo voters a head of the general election,” he said.
“There’s also a likely increase in government expenditure on various projects as the government seeks for votes in the coming general elections.”
Ongodia said the bad weather patterns that resulted into poor crop performance could also spike a surge in commodity prices leading to inflation in the course of the year.
Initially, the country’s annual headline and core inflation had reduced from 3.0% and 4.6% in February to 3% and 2.9% in November, 2019.
Similarly, Ongodia said interest rates are also expected to rise as the central bank strives to tame inflation that would have come as a result of campaign cash.
Statistics from BoU shows that commercial bank interest rates stood at an average of 20.2% as at the end of August last year, up from 19.7% in the quarter to May, 2019.
Relations with neighbours
The government will need to look into mending its relations with Rwanda to boost trade and increase export earnings.
Uganda and Rwanda are entangled in an ongoing diplomatic row that has seen both countries presidents – Yoweri Museveni and Paul Kagame – accuse each other of espionage, political killings and failing trade.
However, the differences between the two presidents, which heightened with Rwanda’s decision to close the border in February last year, has seen traders lose millions of dollars in trade.
This, ironically happens at the time the African countries are currently spearheading the recently launched African Continental Free Trade Area, a move that will open up trade across the continent.
Oil, SME financing
Wilbroad Owor, the executive director of the Uganda Bankers Association told The Independent that despite the fact that 2020 is the beginning of an election year of 2021, they are hopeful as the banking industry that some progress on key investment decisions especially in oil and gas sector will be made, and that the economy will remain stable.
The government in December last year told the African Business Magazine that the Final Investment Decision will be reached by April 2020.
“We are looking forward to do good business,” Owor said. “We also want to focus on expansion of credit using both digital channels and other forms of credit financing including SME finance.”
He also said the industry is looking forward to utilise the alternative dispute resolution framework that it embraced last year to minimise on time spent in courts in a bid to resolve cases.
Maurice Amogola, the chief executive officer at Minet Uganda, an insurance brokerage firm, said they are praying hard that the FID on oil and gas is reached at this year.
“If the final investment decision is done, we will see the economy as well the insurance industry growing,” he said.
He said Minet Uganda is going to focus on providing advisory services to all investors especially in construction, schools, and real estate to sign for insurance services.
Similarly, Ibrahim Kadunabbi, the Chief Executive Officer at the Insurance Regulatory Authority of Uganda said they expect progress in the insurance industry despite of the much anticipated political activities.
He said the insurance regulator is going to ensure that the industry embrace technology including the sale of motor third party insurance online.
“We are also going to embrace the selling of agricultural insurance as well ensure the marine insurance is given the due position it deserves for import and exports but we will begin with imports in 2020,” he said.
The insurance industry in partnership with the government is currently spearheading the sale of agriculture insurance to the farmers to mitigate the agriculture sector against bad weather.
In addition, the industry in partnership with Uganda Revenue Authority has rolled out a plan that will see all local exporters and importers buy marine cargo insurance locally effective July this year.