Economists Suggest Alternative Public Investments Amid Sluggish Growth

As projections continue to point to sluggishness in Uganda’s economic growth in 2017 with GDP growing by 4.5%, advice experts in the financial sectors say stringent fiscal interventions are required.

Bank of Uganda’s Director of Research Dr. Adam Mugume has expressed the need for more efficient execution of public investment projects with less politicization.

He said that Uganda needs to start considering investing in public projects that bring high returns and have a high spillover effect in the private sector.

Dr. Mugume made the remarks on Monday during the Stanbic Bank Economic Outlook breakfast meeting at Kampala Serena Hotel.

Uganda’s public debt currently stands at 36% of GDP and government has in the recent past prioritized infrastructure projects in the transport and energy sectors majority of which are funded by foreign loans.

“Our debt is accumulating very fast but unfortunately it is being spent on non tradables. This implies that we won’t be able to generate forex to pay back the loans, salve ” Dr. Mugume said in a key note presentation citing that the country’s external debt and domestic debt is now Ush. 35 trillion and Ush 13 trillion respectively.

He added that as long as the political leadership does not separate politics from infrastructure projects, the country’s debt risk will increase.

“When you build a road in a pastoralist area, the most people will do with the road is walk their cows. But these cows are not being exported to bring in the foreign exchange to pay for that road which was constructed in dollars.”


According to him, Uganda should replace “white elephant investments” like the national career (Uganda Airlines), car manufacturing with more innovations in the oil sector and agriculture, a sector that contributes 35% of GDP.

Jibran Qureishi, the Chief Economist for Standard Bank in East Africa equally hinted on the need for Uganda to heavily invest in irrigation for agriculture especially given that drought has had a direct effect on overall growth.

“Inflation is expected to go up to 8% by May 2017 but that’s if it rains. Government should invest a lot more in irrigation than it is currently,” he said.

Qureishi said that external shocks like the Trump Presidency in the U.S pose prominent risks on the Ugandan shilling since the U.S dollar is currently gathering strength. A stronger dollar exerts an even bigger burden on Uganda in servicing its external debt.

Another key issue that dominated the discussion was the existing saving gap that would otherwise have financed public investments in the long term. Many argued that the pension sector is a green area for such funding.

“We can’t leave the role of long term financing to banks. In many of the emerging economies, 75% of the financing is from non-banking institutions and pension funds while banks only contribute 25%,” said Patrick Mweheire the CEO Stanbic Uganda.

Uganda’s is expected to have the lowest growth in GDP (4.5%) this year compared to East African counterparts Rwanda (6.5%), Kenya (5.7%) and Tanzania (7%) according to Standard Bank projections.

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