By John Odyek
American financial services company, Standard & Poor’s, has cut Uganda’s credit rating on concern that the budget shortfall will widen due to increase in spending and the reduction of donors’ financial support in 2012 because of corruption.
The country’s imports will continue to exceed exports and external financing requirements will rise, reports the credit rating firm, which provides financial information.
The long-term rating was lowered to B from B+, five levels below investment grade and on a par with countries including Ecuador, Albania and Ghana.
The outlook remains stable though, reflecting the benefits of political stability, investment in infrastructure and solid medium-term growth prospects that will offset the risks from fiscal and external imbalances over the next two years.
Donors including the World Bank, the U.K., Ireland, and Norway, which provide about a quarter of Uganda’s annual budget, suspended their aid in 2012 after government officials were accused of stealing aid money.
Uganda last year agreed to refund U$15.3m (sh38.3b) to donors.
The Ugandan shilling weakened 0.2 percent to 2,501.50 per dollar in the capital, Kampala.
The currency has gained one per cent this year, the best performer among 24 African currencies monitored by Bloomberg after the Somali shilling.
Economic growth in Uganda, which relies on coffee exports, is forecast to hit 6.5% this year, from an estimated 5.6% in 2013 and 2.8%, a year earlier, according to the International Monetary Fund (IMF).
Uganda is expected to begin producing oil in 2018 after London-based Tullow Oil discovered crude oil in the country in 2006. Tullow Oil, China National Offshore Oil Corporation and Total are developing oil finds estimated at 3.5 billion barrels.
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