Finance, Planning & Economic Development minister, Hon. Matia Kasaija, says the size of the Ugandan economy this financial year is projected to rise to Shs 90.6 trillion, equivalent to USD 26.2 billion.
This represents a real annual economic growth rate of 3.9%. Although this is lower than the target growth of 5.5%, Uganda’s performance is higher than the average Sub-Saharan Africa growth rate this year, which is projected to be 1.4%.
Growth in agricultural output slowed to 1.3% this year compared to growth of 2.8% in the previous year, as result of the unusually prolonged drought.
The Industrial sector growth also dropped to 3.4% this year as against 4.7% last fiscal year. Growth in Services also slowed to 5.1% compared to 5.9% last year.
However, Aggregate demand, while subdued, has grown at 2.7% this year, compared to 1.0% last financial year. 12.
While the financial sector remains well-capitalized, a sharp rise in interest rates in 2013 led to increased non-performing loans which peaked at 10.5% of total loans in December 2016, but have reduced to 6.3% as at March 2017.
Kasaija said Uganda’s external and domestic public debt amounted to USD 8.7 billion, in nominal terms, equivalent to 34% of GDP.
“When future debt payment obligations are discounted to today’s value, our Public Debt to GDP ratio stands at 27%, much lower than the threshold of 50% beyond which public debt becomes unsustainable.”
He said Uganda’s public debt is therefore sustainable over the medium to long term.
International reserves at end December 2016 stood at US$ 3billion, equivalent to five and half months of future imports of goods and services.
This is above the required level in the EAC monetary convergence of four and half months of imports.
The exchange rate has remains broadly stable for much of the financial year, and inflation remained within single digit at 6.8% despite pressure from food crop prices.
According to Kasaija, Uganda aims to graduate to middle income status by 2020. Average incomes, or GDP per capita will therefore reach USD 1,039.
Given a population estimate of about 45 million people in 2020, the size of the economy will need to grow by an additional USD 18 billion before 2020 for us to attain middle income status.
He said despite current slowdown in economic growth, projections are that the economy will rebound to a growth rate of 5.5% in FY 2017/18 and eventually to at least 7% in the medium term.
This projection is based on improvements in agricultural production and productivity, and the recovery in aggregate domestic demand and private sector credit.
In addition, Infrastructure and oil sector investments will significantly contribute to this recovery in growth and consequently lead us into middle income status.
To Kasaija, achieving middle income status will require addressing many of the challenges. Dealing with climate change is key to agriculture in addition to reorganizing the sector.
Financial sector reform is necessary to lower interest rates, and reduce the cost of capital to the private sector.
Delays in implementation of key Government projects and programmes must be eliminated.
Corruption by elements of the public service that frustrate investors must be eradicated, he advised, adding that restoring annual economic growth rates to at least 7% is the first step to attain middle income status.