Kampala — The International Monetary Fund (IMF) on Tuesday projected that Uganda's economic growth for the fiscal year 2016/17 will be in the range of 3.5 to 4 per cent down from its earlier official estimate of 5 per cent for this financial year.
The IMF said the drought held back economic activity in the first part of the year especially in agricultural sector. Other factors were low private sector credit and the slow execution of externally financed public investment.
However, the IMF was not fully pessimistic about Uganda's economic growth in the medium term. "With weather conditions improving and a recovery in credit, growth could accelerate to 5 per cent in the Financial Year 2017/18," said the IMF mission team to Uganda, Dr Alex Schimmelpfennig during the joint news conference with the ministry of Finance and Bank of Uganda (BoU).
The IMF mission team visited Uganda between May 2 and 15 to conduct consultations and discussions on the 8th review under the Policy Support Instrument (PSI), which the Fund's executive board is expected to discuss in early July.
Dr Schimmelpfennig said growth should recover over the medium term but risks are tilted to the down side, pointing out that infrastructure and oil sector investments could yield growth of between 6 and 6.5 per cent over the next three to four years.
He added: "The agricultural sector remains exposed to climate conditions and pest infestations."
In the first half of FY 2016/17, Uganda's Gross Domestic Product growth was lower than-expected, largely reflecting temporary adverse weather related factors.
The Permanent Secretary/Secretary to Treasury, Mr Keith Muhakanizi, said government policy of making all contracts in Uganda currency is for the locally produced goods and services should not be charged in US dollar against the exchange rate fluctuation. He said it fits in well with the new policy of Buy Uganda, Build Uganda. "This policy is meant to increase production by buying the local commodities," he said.