##down in export demand and increase in raw material prices such as palm oil which recorded 73 % growth in value of imports. both local manufactures and the government need to take measures to improve competitiveness of domestic goods. ensuring quality through innovation, skill development and technological up - gradation, reducing costs through scale, diversifying product - line in line with the market demand, and achieving self sufficiency in raw materials etc. are some of the areas where entrepreneurs need to concentrate. adversities in production sectors is however likely to be offset by the continued buoyant performance of services sector which accounts for over half of value added of gdp. down turn in inflation, despite its slippage from target, was notable in fy07 relative to trends in preceding couple of years. however, surge in food prices is visible. consumer price index ( cpi ) rose to 9. 3 % in october 2007 on yoy basis mainly due to a jump in food - cpi by 14. 7 % on yoy basis. seasonal factors such as ramazan, higher international food prices, and domestic supply shortages contributed to the pressures on food - cpi. consequently divergence between headline and core inflation grew ; core inflation which came down to almost 5 % in may 07 and remained below average inflation forecast of 6. 5 % has shown signs of picking up. pressure on core inflation reflect ( i ) the lingering impact of significant growth in monetary expansion in the last few weeks of fy07 as was predicted in the monetary policy statement of july 2007 and ( ii ) the second round impact of food prices. as inflationary pressures mount, debates on effectiveness of monetary policy on inflation are triggered afresh. central bank is undoubtedly able to more directly impact core inflation and evidence in fy06 - 07 has shown that monetary policy has paid dividends in bringing down core inflation. higher non - core inflation penetrates economy in different ways ( i ) it impacts consumer purchasing powers since cutting down essentials is difficult and there is low price elasticity of food and energy, ( ii ) even if the government delays the direct pass through of energy prices to consumers, businesses often pass through immediately higher costs of energy on to their consumers, and ( iii ) with inflationary trends persisting consumers and producers higher inflationary expectations set in trends too. higher inflation expectations have become self fulfilling as they have impacted wage setting and pricing decisions now. inflation currently is a global phenomena and driven largely by commodity price trends both in energy and

bank of uganda remarks by prof. emmanuel tumusiime - mutebile, governor, bank of uganda 23rd ordinary meeting of the east african community monetary affairs committee kigali serena hotel 30th july 2019 fellow governors the imf resident representative for uganda representatives of the eac secretariat ladies and gentlemen good afternoon, first, let me take this opportunity to thank governor, john rwangombwa ; management ; and staff of the national bank of rwanda for the warm hospitality and the excellent organizational arrangements. i am pleased to be here in kigali for this 23rd ordinary meeting of the east african community monetary affairs committee ( mac ). allow me to give you an overview of the economic prospects back home. uganda ’ s economy remains strong, with growth projected at 6. 3 percent in fy 2019 / 20, largely driven by the accommodative monetary policy stance and the ongoing public infrastructure investments. inflation over the last 5 years has averaged 4. 4 percent, which is well below the inflation target of the eac macroeconomic convergence criteria. private sector credit extension grew by 12. 6 percent in fy 2018 / 19 compared to 6. 8 percent in fy 2017 / 18 and nonperforming loans as a percentage of total loans have declined from a peak of 10. 5 percent in december 2016 to about 3. 8 percent in march 2019. governors, notwithstanding these achievements on the domestic scene, allow me to underscore the consequences of the fragile international economic environment for our economies. the medium to long - term prospects for the global economy remain very uncertain. just last week, the imf reduced its global growth outlook, already the lowest since the financial crisis to 3. 2 percent, and suggested that policy “ missteps ” on trade and brexit could derail page 1 of 3 a projected rebound. the hazy global economic outlook coupled with the continuing uncertainty in global financial markets and financial risks may lead exchange rate volatility with adverse consequences for investment and growth in our economies. as we deliberate, we need to be aware that these external vulnerabilities, emphasize more than ever, the need for the eac to build resilience by strengthening policy co - ordination and intra - regional trade, which i am happy to note, is picking - up. governors allow me to reiterate the significant progress made towards the operationalization of the eamu protocol. we have made strides on harmonization of : monetary policy frameworks, exchange rate policies,