KAMPALA – Uganda’s economy will grow by 5.9 percent in the 2016/2017 (July-June) fiscal year, up almost a percentage point from the levels estimated for the previous 12 months thanks to spending on large infrastructure projects, the World Bank said.
The bank said in a report published on Monday that private sector investment was expected to pick up as fears of political turmoil continued to dissipate after the relatively peaceful conclusion of national elections in February.
Veteran leader Yoweri Museveni, 71, was re-elected for another five-year term, extending his three decades in office, although the opposition disputed the result.
“The predominant driver of growth will be an increase in … the construction sector, with this growth driven by Uganda’s significant investments in public infrastructure,” the bank said.
Uganda, which has found oil reserves that it wants to develop, is rolling out a range of big energy and transport projects, including highways, two hydro power dams, a crude oil pipeline and a refinery.
“The stimulus effects from this large public investment program will offset those of a weak external sector,” it said.
Some projects are being financed with credit from China and the government has indicated it wants Beijing to help fund more initiatives, such as a new railway link to Kenya and the coast.
Uganda’s total public debt stood at 31.2 percent of gross domestic product (GDP) at the end of 2015 and is seen rising to 46.1 percent of GDP by 2018, according to the bank’s data.
The bank said any surge in debt beyond the threshold of 50 percent of GDP could pose risks to the outlook if investments did not generate sufficient revenues to service the debt.
Possible adverse weather affecting an economy still heavily reliant on agriculture, regional instability and protracted low global economic growth could undermine prospects for Uganda, which neighbours conflict-torn South Sudan, the bank added.
Economic growth for the 2015/2016 fiscal year is currently estimated at 5 percent. The World Bank figure suggests slightly faster growth than the 5.5 percent previously forecast by the IMF for 2016/17. (Reuters)