How 7% economic growth will be achieved

The government yesterday laid out 11 key interventions, which it says will enable Uganda’s growth to be at an average of 6.5-7 percent per year over the next five years.

Higher economic growth increases state capacity and supply of public goods. When economies grow, states can tax revenue and gain the capacity and resources needed to provide the public goods and services that their citizens need, like health care, education, social protection and public service.   

Dr Adam Mugume, the executive director of research at Bank of Uganda, in an interview last evening, said: “The growth will be supported by improvements in business and investor sentiments along with the realisation of improved foreign exchange inflows, the faster recovery of the tourism sector, and the implementation of growth promoting policy measures such PDM and Emyooga, and private sector investments in the extractive industry.”

The citizens of a country with a high Gross Domestic Product (GDP) are likely to have high income and high standards of living, hence spending and investing more.

A senior research fellow at Economic Research Policy Research Centre, Mr Corti Paul Lakuma, told Daily Monitor in an interview yesterday that the economic growth of 6.5 percent to 7 percent is possible because of investment in oil.

“A lot of investment is going on and Uganda is reaching the production stage of oil. We may even exceed 6.5 percent to 7 percent in the future,” he said.

However, Mr Lakuma said the big question is how high growth is going to benefit ordinary people because the problem is high economic growth, if not well-planned, will end up benefiting a few people.

He explained that oil growth should be linked to redistribution to the local citizens, while tax capacity for the government to generate more resources should also be in place.

“The Ministry of Finance still has a lot of work to do beyond just registering high economic growth. There should be a deliberate policy to ensure that everyone benefits from the high growth, whereby everybody has something in their pocket and has something to take back home,” he suggested.

Mr Lakuma further stated that doing so, there should be political will and effective economic institutions to drive the planning process and necessary economic development needs.   

While presenting the National Budget for the fiscal year 2023/24 at Kololo Ceremonial Grounds yesterday, Finance Minister Matia Kasaija said the economic growth strategy underlying the budget for the next financial year and the medium term includes: increased domestic revenue mobilisation and a reduction in non- concessional borrowing to ensure debt sustainability.

Other areas that should boost the economy’s growth include proper implementation of the Parish Development Model and Emyooga initiatives; effective implementation of the various export strategies and enhancing access to global and regional markets.

“Support for the private sector by reducing the cost of doing business through: construction of the Standard Gauge Railway and the rehabilitation of the Meter Gauge Railway; Development of small scale solar-powered irrigation schemes to address climate change and ensure food security; Maintenance of both tarmac and murram roads; continued investments in industrial parks and energy transmission lines,” he said.

Other growth strategies the government has put in place include: provision of affordable credit for micro and small enterprises and low- income groups through the Small Business Recovery Fund, Emyooga and Microfinance Support Centre; and funding for medium to large enterprises through the Uganda Development Bank. Others are provision of quality seedlings, pesticides, fertilisers, storage and marketing in the agro-industrialisation value chain to increase agricultural production and productivity.

“Rapid development of oil and gas production, specifically the construction of the East African Crude Oil Pipeline and the National Oil Refinery; expansion of our skilled labour force to meet the demand of a diversified economy especially industrial skills,” he said.

“As a result of these interventions, Uganda’s economy is projected to grow at 6 percent in the financial year 2023/2024. Over the next five years, the economy is projected to grow at an average of 6.5-7% per year,” Mr Kasaija announced.

Relatedly, Mr Kasaija said industrial development and investment will be key to economic growth, pointing out that eight government owned industrial parks are currently operational.