The World Bank has said the 7 per cent projected growth rate under the National Development Plan (NDP) III, which started this year is too ambitious given the current economic fundamentals.
NDP III, which will start in the 2020/21 financial year, is a government-working document for at least the next five years.
Speaking during a media briefing in Kampala on Wednesday about Uganda’s economic outlook, Mr Richard Walker, the World Bank senior economist, said government’s capital spending continues to fall, dropping to about 8 per cent in the last two financial years.
This, he said, has constrained the country’s fiscal policy that is characterised by low tax revenue to GDP ratio.
“Capital spending continues to fall short of expectations, diminishing the expected return from public investments. 5.3 per cent capital spending versing budget allocation of 6.4 per cent. This inability to really ramp up capital spending over the last few years is constraining the ambitions of Uganda’s national development plans for rapid growth and social-economic transformation,” he said.
Under the NDP III, Uganda is to grow by an average of 7 per cent in the next five financial years.
However, Mr Walker warned, current economic fundamentals are likely to affect projected growth.
“The economy is projected to slow down in the 2020/21 financial year due to the general elections scheduled to for 2021 (slow investments and economic activity),” he said, noting that the continued delays in the oil sector and swings in oil prices present varying risks to Uganda’s growth prospect.
Mr Walker also warned that regional and global factors key, among them, slowed global growth, uncertainty regarding relationship with Rwanda and trade disputes with Kenya, could undermine Uganda’s outlook.
Inflation within target
According to Mr Richard Walker, inflation is expected to remain well within the Central Bank target of 5 per cent over the next year. This will bar price volatility assisted by the current good weather, among other external factors.