Analysis of Monetary Policy Objectives as Applied to Uganda’s Economy: The Dream to Achieve the Middle-Income Status in 2020 is Gone

Abstract

This article analyses the effects of monetary policies in terms of monetary objectives, and instruments which are used by most monetary authorities to manage the requirements of the country’s economy and how they influence economic activities of the country. The study is centered on four policy objectives which Bank of Uganda has been using namely; full employment, price stability which includes controlling inflation and economic fluctuations, economic growth and maintenance of balance of payment equilibrium. The instruments which are bank rates, open market operations, change in reserve ratios and selective credit controls used by the central bank are dealt with in this study. Though the economic growth figures of Uganda’s economy have been in the range of 3.0 % to 6.1 % for many years, this has not demonstrated the general growth of income of Ugandans during the same period. According to the World Bank in 2019, Uganda with its population of over 42 million people has a gross domestic product of US $ 33.6 million and is placed number 3 after Kenya and Tanzania. However, in economic growth, it is number 4, after Rwanda, Tanzania and Kenya respectively. This questions the ability of the country to achieve the middle-income status by 2020 as had been predicted. The weaknesses in implementation of the monetary objectives which caused the government failure to achieve Uganda’s goal and finally the important strategies and areas which Uganda should use to generate high rates of economic growth to transfer in the economy and maintain macroeconomic stability are recommended in this aricle.