The Monitor (Kampala)

5 April 2007

Uganda: Economic Growth Stagnates

Kampala — UGANDA is one of the African countries whose economic growth did not improve in 2006, according to a new report by the United Nations.

The 2007 edition of the Economic Report on Africa (ERA 2007) compiled by the United Nations Economic Commission for Africa, shows that the country's economic growth remained at just 5.0 per cent behind Kenya's 5.5 per cent and Tanzania's 5.8 per cent.

Though it was the best performing sub-region in the previous two years, East Africa experienced a slight decline in growth rate in 2006.

Oil prices

Higher oil prices were the main factor that prevented the sub-region from achieving a higher growth rate, as all the countries of East Africa are oil importers.

The report, which was launched in the Ethiopian capital Addis Ababa on Tuesday, warns that with real growth rates stagnating in relation to development goals, many countries could fail to meet global development objectives.

"With only four countries recording an average real GDP growth rate of 7 per cent or more during 1998-2006, few African countries are positioned to achieve the Millennium Development Goals (MDGs) by 2015," the report read in part.

Not accurate

However, the Deputy Secretary to the Treasury/ Permanent Secretary in the Ministry of Finance, Planning and Economic Development Keith Muhakanizi said though the economy had not grown, it was not accurate to say that it had stagnated.

He said the country had not achieved its target of 7 per cent growth due to the power crisis, which he said had affected productivity.

"It has not stagnated. Yes, economic growth has not accelerated but it is growing. If it was not for the power problem, which we are now labouring to contain, we would have achieved our target of 7 per cent or even 8 per cent."

Only eight African countries surpassed the 7 per cent growth rate in 2006, the levels at which UN experts say poverty begins to be reduced.

Overall, the African economy is expected to grow at a rate of 5.8 per cent in 2007, slightly higher than the rate of 5.7 per cent recorded in 2006. The report also projects positive growth rates for East Africa at 6.0 per cent, which Mr Muhakanizi described as "fair enough."

The report says despite the deceleration of growth in major industrial economies, global demand for African products, especially oil, minerals and agricultural commodities, is expected to remain steady due to strong growth in emerging Asian economies, especially China.

Oil-exporting African countries contributed 57.5 per cent of the continent's 5.7 per cent growth rate in 2006, compared to 53.4 per cent in 2005.

The report warns that efficient management of oil revenues and economic diversification are essential to reduce vulnerability to oil price shocks and ensure equitable sharing of gains from oil revenues.

However, the economies of oil importing countries will suffer unless debt relief and additional non-debt-generating external financing of fiscal deficits are provided to help them to sustain economic growth and achieve the MDGs.

"In the absence of such support, the efforts of macroeconomic reforms over the last two decades and the opportunities created by the Highly Indebted Poor Countries Initiative will be wasted," it says.

But it warns the donor community against the "generalised one-size-fits-all" growth policies embedded in macroeconomic stabilisation and second-generation reform programmes, saying they would not help African countries.

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