KAMPALA, May 15 (Reuters) - Uganda’s economy will expand by 5.8 percent in the 2015/16 (July-June) fiscal year from an estimated 5.3 percent in the previous year boosted by public investments, the International Monetary Fund said.
The government is at various stages of implementing several multi-billion dollar infrastructure projects, including hydro power dams, a refinery, express highways and a railway line. The Treasury estimates economic growth of 5.3 percent in the 2014/15 fiscal year from 4.5 percent in the previous year.
The IMF said in a statement on Thursday that growth would be fuelled “by scaled-up public investment and a recovery of private consumption supported by stronger credit growth.”
Relatively low inflation, healthy foreign exchange reserves of above 4 months of import cover and low government debt are also providing the Ugandan economy with a strong cushion against external shocks, the IMF said.
It was crucial though for Uganda to contain spending pressures in the run up to next year’s elections not to generate “undue pressures on inflation and domestic debt,” the IMF said.
Uganda’s government has asked parliament to approve an increase of more than five percent in public spending for this financial year but opponents said it was a campaign ploy to win votes in next year’s elections that could weaken the currency.
Last month core inflation, a key target of the central Bank of Uganda (BoU), increased to 4.6 percent from March’s 3.6 percent but the IMF said it was likely to remain within BoU’s medium-term target of 5 percent.
In April BoU raised its policy rate to 12 percent from 11 percent in part to slow the rise in inflation and support the shilling, which is down 7.5 percent to the dollar this year.
The east African country is expected to start pumping crude in 2018 from its oil fields in its west near the border with the Democratic Republic of Congo (DRC). Officials say Uganda will leverage these projects to maximise benefits from the burgeoning oil industry and accelerate the pace of industrialisation. (Reporting by Elias Biryabarema; Editing by James Macharia)