Kampala — The effects of the global financial crisis are slowly penetrating the Ugandan economy, with the country registering a drop in Foreign Direct Investment (FDI) for the first time in more than 10 years.

The decline is a blow to a country that ahas seen a dramatic increase in FDI in recent years with investment growth having increased rapidly - from $295.4 million (Shs6.5 trillion) in 2004/05, to a peak $778.4 (Shs17.1 trillion) in FY 2007/08.

At its conclusion, 2008/09 registered a 5.5 per cent decline in FDI as investment fell to $735.5 billion (about Shs16.1 trillion) from $778.4 billion (about Shs17.1 trillion) in 2007/08.

Figures released by the Uganda Investment Authority in a press conference at the Media Centre on June 3, predicted a gloomy investment period for the country in the 2009/10. In spite of this, UIA Executive Director, Dr Maggie Kigozi played down the slump and was optimistic that investment growth trend would progressively increase by the end of 2009/10.

Dr Kigozi attributed the decline to the current global economic slowdown, the recent appreciation of the shilling, and the trepidation in venturing into local business shown by the European countries that constitute Uganda's target market for FDI.

Some of the leading foreign investors, including Japan, Iran, China, Canada, Denmark, Eritrea, Zimbabwe, the United States, Sweden, and Germany, exhibited a hesitancy in venturing into local investment according to the UIA quarterly performance report.

According to the figures, the United Kingdom remains Uganda's largest source of investment, with the European nation injecting $211 million (about Shs4.6 trillion) into finance five projects in the country in the last financial year.

Uganda is in the second investment pack before India with a projected monetary expenditure in 2009/10 standing at $99 million (Shs217 billion) for thirty-five projects and $33 million (approximately Shs72.6 billion) in eight projects respectively.