to look forward to, and prepare to face the challenges of the future. at the core of the bank ’ s statutory mandate is monetary policy and financial regulation. in the coming decades, our monetary policy will continue to prioritise, above all else, the control of inflation. bis central bankers ’ speeches this is because low and stable inflation is a precondition for mobilising high levels of savings and investment and for efficient resource allocation, which are essential for sustained economic growth. along with other central banks around the world, the bank of uganda prioritises the control of inflation because it is the only institution within the country, which has the tools to do this, through its monetary policy. for most of the last 25 years uganda has enjoyed relatively low inflation, averaging approximately 6 percent per annum. that achievement would not have been possible had the bank not put inflation at the forefront of its monetary policy objectives. bank regulation and supervision must constantly evolve to meet new challenges arising from the structure and technology of the financial services industry. in the coming decades, the financial services industry will be transformed by information technology. this has already started to happen with the advent of mobile money. it is also likely that cross border banking will become even more important than it is today, especially where institutional arrangements such as the east african common market enable services to be traded freely across borders. the priority objectives of our bank supervision will remain the protection of depositors and the preservation of financial system stability. a key challenge for the bank will be to ensure that the introduction of new financial products and new ways of delivering financial products, which will be made possible by technological innovations and which offer immense benefits to customers, can be achieved in a manner that is consistent with our key prudential objectives. in addition, the increasing importance of cross border banking means that effective bank supervision in uganda will not be possible without close collaboration with our counterparts in other countries. economic integration in east africa is vital for uganda ’ s long term prospects for development. the east african community ( eac ) partner states have a three - phase programme for economic integration in the region, which involves : first, the customs union ; second, the common market ; and, third, the monetary union. the bank has been an active participant in the preparations for eac monetary union under the monetary affairs committee of the regional central banks. monetary union will be very challenging to implement effectively, and we must study and heed the lessons to be learned from the difficulties faced by

remarks by prof. emmanuel tumusiime - mutebile, governor, bank of uganda uba informal dinner residence of the ceo, stanbic bank kyadondo road, nakasero 12 may 2017 let me begin by thanking you all for coming to this informal dinner. as always on these occasions i am delighted to see you all here. i want to make a few brief remarks about the current state of the economy and the prospects for the near and medium term. when we open our newspapers in the morning we often read articles about how the economy is performing badly. but much of what is written is either exaggerated or misconstrued. it is true that real growth in the current fiscal year will be lower than was initially projected, but that does not mean that the economy is in recession – which entails a contraction of output. there is a slowdown in economic growth but this should prove to be only temporary. page 2 of 9 as we discussed at the last uba meeting in april, real economic growth in the current fiscal year has been pulled down by the supply side shock to agriculture, caused by the drought. the quarterly gdp data from ubos indicate that real output was about 1. 5 percent below its trend – which is a proxy for the equilibrium level of output - in the first half of 2016 / 17, with most of the shortfall due to lower than trend agricultural output. we do not yet have the quarterly gdp data for the third quarter of 2016 / 17, but the bou ’ s composite indicator of economic activity – which is a high frequency indicator – shows that there was a rebound in economic activity in that quarter, with an acceleration of growth in both the industrial and services sectors. page 3 of 9 given the trends in the third quarter of the fiscal year and the fact that we are now enjoying better weather for agriculture, i expect that in the second half of the fiscal year, the economy should claw back some of the output losses which it suffered in the first half. however, we are forecasting that real growth for the full fiscal year will be only about 4 percent, which is one percentage point below potential. nevertheless, the supply side shock to agriculture should be reversed in the next fiscal year, which will enable real output to revert to its medium term trend. this means that we should experience growth of more than 5 percent in 2017 / 18. i also want to refute the claim that the economy is suffering from a lack of demand. of