Although Uganda is attracting a lot of Foreign Direct Investment (FDI), it loses $400 million (about Shs1.05 trillion)
per year in capital outflows in form of dividend payments to the shareholders, the Ministry of Finance has revealed.
Owing to economic liberalisation, there are many multinational companies operating in Uganda in the energy, agriculture, oil, and manufacturing, among others.
Speaking at the launch of African Development Bank Economic Outlook for Africa 2014 in Kampala on Wednesday, the acting commissioner macroeconomic ministry of Finance, Mr Robert Okudi, said Uganda witnesses capital inflows as well as out inflows.
“There is an annual out flow of $400 million in dividend payments to shareholders of companies operating in Uganda,” he said.
Discussing how the revenue required for investment in Uganda can be generated, he said: “We have the opportunity in the capital markets; vibrant capital markets will enhance revenue mobilisation and domestic savings in this country.”
Although Uganda’s financial sector is one of the fastest growing and most profitable sectors of the economy, it is not deep enough to support big public and private investments, according to Mr Okudi.
He said Uganda needs financial deepening because commercial bank financing alone is not sufficient enough to provide all the funds needed in the country for investment.
“The largest commercial bank in Uganda cannot lend more than $50 million,” he said.
From the macroeconomic perspectives, the deputy Governor Bank of Uganda, Dr Louis Kasekende, said there is need for African countries to rebuild the fiscal space (financial reserves) to guard against any exogenous economic shocks.
“We are likely to get another crisis I don’t know when,” he said.
Dr Kasekende said while markets are doing well, there is need for government to build strong institutions to drive growth. With FDI showing signs of increasing, Dr Kasekende said there is need of converting resources arising from FDI and Official Development Assistance into public and private capital investment.