IMF says Uganda's economy to grow by 5 percent

Nov 07, 2012

Uganda's economy is set to expand by five percent in the 2012/13 fiscal year, driven by falling lending rates and higher government spending.

KAMPALA - Uganda's economy is set to expand by 5 percent in the 2012/13 fiscal year from 3.4 percent in the previous period, driven by falling lending rates and higher government spending, the IMF said on Tuesday.

"GDP growth is projected to increase to 5 percent this fiscal year, with core inflation averaging about 6 percent," the International Monetary Fund said of the East African Nation that discovered oil in 2006 and expects to start production in 2017.

Potential delays in planned infrastructure projects and any problems in the country's trading partners could however pose risks to its growth outlook, the Washington-based fund said in a statement.

It said fresh inflation pressure could come from "food price and exchange rate pass through effects." Inflation peaked at 30 percent in October last year on the back of high food and fuel prices.

Uganda raised interest rates aggressively last year to combat inflation and prop up the shilling currency, but has since cut its policy rate by 10.5 percentage points this year to 12.5 percent.

The central bank has since managed to bring it down using a very tight monetary policy stance. The rate fell to 4.5 percent last month from 5.5 percent in September.

The IMF said Uganda needed to improve its business climate, strengthen tax collections and make effective use of revenues to be able to drive economic growth to its true potential of around 7 percent.

Reuters

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