KAMPALA, July 25, 2017 – The Uganda Economic Update released by the World Bank today shows the country currently with a shortfall of nearly $1.4 billion in financing per year, equivalent to 6.5 percent of its Gross Domestic Product (GDP). Uganda needs to explore raising capital from the private sector to finance its infrastructure investments, which are key to driving growth, creating jobs and reducing poverty.
The report, “Infrastructure finance deficit: Can public–private partnerships fill the gap?”, shows Uganda’s economy growing at an annual rate of 2.5 percent by the of end March 2017. While this falls significantly short of earlier projected annual growth of 4.5 percent, GDP is still expected to rise to 5.2 percent in FY 2017/18, and to 6 percent in the following year. This is likely to be propelled by the development of oil-related infrastructure following the issuance of long-awaited oil exploration agreements.
This infrastructure includes an oil pipeline that will be jointly developed with Tanzania, an oil refinery in western Uganda, and a Standard Gauge Railway to the Indian Ocean. The construction and services sectors will continue to be the main drivers of growth, the Update says.
Its renewed tendency to grant tax exemptions and the low rate of collecting taxes—now at 13.5 percent of GDP—could undermine the government’s ability to provide services and support faster growth, notes the Update. Combined with poor return on public investments, this could make it difficult to service the country’s growing debt. Other risks include unpredictable weather that could affect agriculture, uncertainty over the Kenyan elections, and continued strife in South Sudan, all of which could affect the economy significantly.
The Economic Update recommends the establishment of robust institutions and procedures to manage Public–Private Partnerships. It says Uganda adopted the Public-Private Partnership Policy Framework in 2010 while the Public-Private Partnerships Act was approved in 2015. However, a lack of implementation means public–private partnerships have been slow to take off. “Public-private partnerships have the potential to offer many benefits for the Government and the people, but their management requires strong structures and policy frameworks,” said Rachel Kaggwa Sebudde, World Bank Senior Economist.
In addition to strengthening the legal and regulatory frameworks, the report also calls for transparency and accountability to allow citizen engagement and involvement in decision making.