Economic
growth in Uganda may accelerate in the coming fiscal year, underpinned by
government spending on infrastructure and an anticipated recovery in lending to
the private sector, according to the International Monetary Fund.
The
growth rate may increase to 5.5 percent in the 12 months through June 2018,
compared with an estimated 4.5 percent this year and 4.8 percent in the prior
12-month period, Clara Mira, IMF’s resident representative in Uganda, said in
an emailed response to questions. The Finance Ministry forecasts slightly
higher growth of
between 6 percent and 7 percent.
The East African nation, which is on a cusp of oil production,
is investing in electricity production, roads, railways and an oil
pipeline. Expenditure on government projects will increase 11 percent to
4 trillion shillings ($1.1 billion) in the coming fiscal year, Finance Minister
Matia Kasaija said March 23. That will account for about 13 percent of overall
planned government spending, according to Treasury estimates.
“The
effective implementation of the infrastructure investment scaling up -- to
ensure that the projects yield the expected growth, exports and fiscal revenue
dividends -- together with investments in the oil sector and the start of oil
production, and further progress in regional integration are expected to push growth
in the medium-term to over 6 percent,” Mira said Tuesday.
London-based
Tullow Oil Plc, China National Offshore Oil Corp. and France’s Total SA are
jointly developing crude finds estimated at 6.5 billion barrels. The state
estimates that oil companies will spend $8 billion in the country ahead of
production that’s scheduled to begin in three years.
Uganda is
increasingly borrowing to fund its “ambitious” infrastructure projects, which
may raise public debt to a peak of 44 percent of gross domestic product in
2020-21, from 35 percent in 2015-16, Mira said. The debt levels remain
manageable and at low risk of distress, she said.
Vulnerability
for Uganda’s debt emanates mainly from weak exports, exposure to exchange-rate
depreciation, low revenue collection and the short-term nature of its
domestic-debt maturity, Mira said.
Uganda is
Africa’s biggest exporter of coffee, which is one of the country’s main source
of foreign exchange. The shilling weakened 6.2 percent against the dollar last
year.
The debt
level will remain sustainable if the government implements its development
plans properly and returns to fiscal consolidation once the projects are
complete, she said.
The nation’s
tax-to-GDP ratio of about 13 percent is “significantly” lower than that of
regional peers, she said. Increasing compliance with value added tax could
yield additional revenue equal to 2 percent to 2.5 percent of GDP. The IMF also
urged the government against tax exemptions to enhance revenue
collection.
“Tax
exemptions discourage compliance in tax payers, increasing the incidence of tax
evasion, and are usually very complicated to manage, increasing the incidences
of abuse,” Mira said.
Source: Bloomberg
No comments:
Post a Comment