Uganda’s GDP to grow 5.5 pct, boosted by oil & rate cuts – budget paper

Uganda’s economy will grow 5.5 percent in the year to June 2018, edging up from estimates for the current fiscal year thanks to lower borrowing costs and higher oil sector investments, a budget paper seen by Reuters on Monday showed.

The East African country’s central bank began a round of policy easing last April, since when the benchmark rate (CBR) has dropped from 16 percent to 11.5 percent.

“Growth will be supported by a recovery in private sector credit due to the easing of monetary policy,” the finance ministry’s budget framework said.

Issuance of crude production licenses would boost activity in the oil sector, also aiding growth, the paper said.

Uganda discovered crude reserves the government now estimates at 6.5 billion barrels about a decade ago in its western region along the border with the Democratic Republic of Congo.

Commercial production is expected to start in about four years, when an export pipeline through Tanzania to the Indian Ocean coast is due for completion.

Last year the government issued production licenses to France’s Total and UK explorer Tullow Oil.

The government expects economic growth of 5 percent in the year to June 2017, 50 basis points lower than it estimated last June due to the impact of war in neighbouring South Sudan, depressed commodity prices and slower implementation of public infrastructure projects.

Uganda is developing multiple infrastructure projects including expressways, hydropower dams, airport refurbishment, and a standard gauge railway line.

Overall public spending in the next fiscal year is forecast to decline to 24.3 trillion shillings ($1.20 billion) from 26.4 trillion, with much funnelled into civil works and the transportation and energy sectors, the paper said.

War in South Sudan has virtually cut off transport routes and disrupted trade between the two countries.

Total domestic debt issuance via Treasury bills and bonds in the next fiscal year is forecast to rise 7 percent to 1.5 trillion shillings, the paper said.

The government, which tends to vastly overshoot its stated debt target, said last June it planned to issue bills and bonds worth 612 billion shillings in fiscal 2016/17.

Originally reported by Reuters.

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