Budget countdown: Economy to grow 6.5%
Jun 03, 2007
THE economy is projected to grow by 6.5% compared to 5.4% the previous year, the finance ministry has projected.<br>The ministry said in a report that the growth was due to a rebound in agricultural production following a poor performance last fiscal year.
By Mary Karugaba
THE economy is projected to grow by 6.5% compared to 5.4% the previous year, the finance ministry has projected.
The ministry said in a report that the growth was due to a rebound in agricultural production following a poor performance last fiscal year.
The ministry also projects the cash crop production to grow by 12.2% compared to last year’s 9.9%.
The growth is attributed to the favourable weather conditions in most cash crop producing areas coupled with improved world market prices.
Other sectors like mining and quarrying, construction and transport and telecommunications, are all projected to grow in double digits in real terms.
The annual headline and underlying inflation is, however, expected to rise to an average of 5.8% and 6.1% respectively. This will be higher than the Government’s 5% target.
The report attributes the rise to a decline in food crop production which will lead to a rise in the prices of goods.
“The upward adjustment in utility prices, notably electricity and water tariffs, had a knock-on effect on the prices of other goods and services. “Secondly, there was unexpected increase in demand for goods particularly from southern Sudan and the DR Congo which added to inflationary pleasure,†discloses the report.
However, the report indicates that although the growth might hit 6.5%, in the subsequent year, it will remain constant for more than two financial years as robust growth in the communication, construction and mining sector continues.
An earlier national budget framework paper for 2007/8 and 2009/9 financial years, that was presented to Parliament, indicated that domestic revenue was projected at sh3,004b. This represents a 13.2% increase on the current fiscal year.
The report indicated that the budget support in the form of grants and confessional loans was projected at sh756b in the next fiscal year.
The report warns that any excess government expenditures will have to be funded by borrowing.
“This would either result in faster than projected monetary growth, and therefore higher inflation, or it would lead to higher interest rates and a squeeze out of the credit markets in the private sector,†cautioned the report.
THE economy is projected to grow by 6.5% compared to 5.4% the previous year, the finance ministry has projected.
The ministry said in a report that the growth was due to a rebound in agricultural production following a poor performance last fiscal year.
The ministry also projects the cash crop production to grow by 12.2% compared to last year’s 9.9%.
The growth is attributed to the favourable weather conditions in most cash crop producing areas coupled with improved world market prices.
Other sectors like mining and quarrying, construction and transport and telecommunications, are all projected to grow in double digits in real terms.
The annual headline and underlying inflation is, however, expected to rise to an average of 5.8% and 6.1% respectively. This will be higher than the Government’s 5% target.
The report attributes the rise to a decline in food crop production which will lead to a rise in the prices of goods.
“The upward adjustment in utility prices, notably electricity and water tariffs, had a knock-on effect on the prices of other goods and services. “Secondly, there was unexpected increase in demand for goods particularly from southern Sudan and the DR Congo which added to inflationary pleasure,†discloses the report.
However, the report indicates that although the growth might hit 6.5%, in the subsequent year, it will remain constant for more than two financial years as robust growth in the communication, construction and mining sector continues.
An earlier national budget framework paper for 2007/8 and 2009/9 financial years, that was presented to Parliament, indicated that domestic revenue was projected at sh3,004b. This represents a 13.2% increase on the current fiscal year.
The report indicated that the budget support in the form of grants and confessional loans was projected at sh756b in the next fiscal year.
The report warns that any excess government expenditures will have to be funded by borrowing.
“This would either result in faster than projected monetary growth, and therefore higher inflation, or it would lead to higher interest rates and a squeeze out of the credit markets in the private sector,†cautioned the report.