3 Min Read
KAMPALA (Reuters) - Uganda's economy will reach growth rates of between 6 and 6.5 percent within three to four years if energy and transportation infrastructure projects are completed and oil starts flowing, an International Monetary Fund official said on Wednesday.
The east African country is implementing several mammoth projects, including hydropower plants, expressways, a crude oil pipeline, a standard gauge railway and a refinery.
Most of these are expected to be either wholly or partially constructed in the next three to four years. The crude pipeline is due for completion in 2020.
"Once all the infrastructure projects are more or less finalised and oil starts flowing we see economic growth at 6 to 6.5 percent," Clara Mira, IMF representative in Uganda told Reuters in an interview.
"There's going to be much more activity. It's bottlenecks to growth being lifted."
Uganda enjoyed vigorous growth rates of about seven percent in the early to mid-2000s.
But a slowdown in foreign direct investment due to economic weakness in Europe and elsewhere and deepening instability in the region have blunted growth.
Some of the regional destinations for Ugandan exports like South Sudan, Burundi and eastern Congo been plunged into unrest, disrupting trade routes.
The IMF has lowered its Uganda growth rate forecast for the 2016/17 fiscal year that ends next month to between 3.5 to 4 percent, citing the impact of drought and slow private sector credit growth.
The population is growing annually at 3.3 percent, the World Bank said.
Mira said possible missteps in implementing the projects, including delay or cost overruns, may prevent them from delivering the "growth dividend" vital to making them viable.
In recent years Uganda ramped up borrowing, especially from China, to fund the projects.
Some critics have accused the government of piling up too much debt, only a few years after benefiting from the multilateral debt relief initiative of the mid-2000s.
Last year a central bank official said Uganda could face "debt distress" in a few years if oil production is delayed further.
"We are at the moment when the risks have increased, the risks to debt sustainability," Mira said.
The IMF projects Uganda's total public debt as a percentage of GDP to reach 42.8 percent of GDP in 2022, up from 38.6 percent in 2017.
Reporting by Elias Biryabarema; editing by Katharine Houreld and Gareth Jones