important for commodity producers to accumulate macroeconomic and fiscal space during periods of high commodity prices, so that countercyclical macroeconomic policies are feasible during price slumps. this requires saving a significant share of the resource revenue earned during price booms, and avoiding accumulating substantial liabilities which will have to be repaid from uncertain future resource revenues. most of the commodity producers in the region failed to build adequate policy buffers during the commodity price boom and, as a consequence, have no option but to implement fiscal retrenchment during the current price slump, which exacerbates the contraction in demand and output. the second lesson pertains to the need to avoid becoming over - dependent on commodity exports for foreign exchange earnings and public revenues. the east african economies have begun to diversify their economies away from primary commodities. this is shown in figure 5 for uganda. the share of primary commodity exports, proxied by sitc categories 0 – 3 and 9, has fallen from over 90 percent of total merchandise exports in 2002 to less than bis central bankers ’ speeches two thirds in 2015. in contrast, the share of processed commodities ( sitc categories 4, 5 and 6 ) and manufactured products ( sitc categories 7 and 8 ) has risen from 8 percent to 35 percent over this period. this diversification could be put in jeopardy if hydrocarbon production drives up the real exchange rate and renders existing export industries uncompetitive. real exchange rate appreciation is not caused by oil production per se, rather it is determined by the magnitude of additional domestic spending which revenues from oil production make possible. the key to avoiding damaging real exchange rate appreciation when oil starts to be produced in commercial quantities is the careful management of the public spending out of oil revenues. if oil revenues allow a large and rapid expansion of public spending, uganda will risk suffering all of the negative consequences of the resource curse which have afflicted other oil producers in the region. finally, i want to emphasise the importance of building strong institutions. institutions are crucial for macroeconomic management, and especially so in commodity producing economies. empirical research from around the world has shown that whether or not commodity producers actually derive benefit from their natural resources, or instead suffer from a resource curse, depends on the quality of their economic governance, which in turn depends on the strength of their institutions. strong institutions are also important to create a business environment, characterised by transparent and predictable rules and regulations, competitive markets and a level playing field

a timely manner seems beneficial because it reduces asymmetric information and uncertainty in financial markets. information about the financial stability framework and public evaluation of national balance sheets against the yardstick on international codes and standards offers investors an opportunity to assess risk better and arrive at more informed decisions. moreover, greater clarity about financial stability policy potentially simplifies the task of monetary and fiscal policy by establishing clear lines of responsibility and objectives. in an environment of greater trust, effective communication by the central bank facilitates greater flexibility to act by various agents in the economy. over the last few decades, it has been widely recognized that the maximum degree of independence for central banks, together with a clearly defined mandate, is the best way to ensure time consistency in the implementation of monetary policy and therefore guarantee stable prices. consequently, the 1995 constitution of uganda has granted the bank of uganda full independence in the pursuit of its mandate. in a democracy, transparency and accountability are the quid pro quo for that independence. in other words, it is the duty of independent central banks to be transparent, accountable and to communicate. the bou is made more accountable by clearly explaining our objectives and decisions to the general public, media, parliament and to the professionals in the financial markets. but transparency is not only a duty for the central bank. it is clearly also in the bank ’ s interest to embark on an effective communication as it contributes considerably to the efficiency of its policies. this helps to anchor the inflation expectations of the financial markets and the public. through efficient communication we can reduce inflation uncertainty and the costs associated with such uncertainty for consumers and investors. therefore it has immediate economic benefits for society. we achieve this by being clear about our definition of price stability and by being transparent in our actions. the economic agents and public need to be convinced that the central bank ’ s monetary policy decisions are consistently focused over time on achieving the announced aim. in a market - based economy the central bank can directly influence only short - term interest rates through its monetary policy instruments. however, consumption and investment decisions, and thus medium - term price developments, are to a large extent influenced by longer - term interest rates, which depend on private expectations regarding future central bank decisions and future inflation. it is important that these developments in longer - term rates support the objective of maintaining price stability over the medium term. this in turn requires that the central bank is regarded as credible and predictable. a central bank which does not succeed in communicating the principles underlying its monetary policy and is