Uganda: Uganda Outlook for 2013-17

The country (Uganda) is situated in Eastern Africa, west of Kenya.
It has borders with Congo (Kinshasa) for 765km, Kenya for 933km, Rwanda for 169km, Sudan for 435km and Tanzania for 396km.
Land in Uganda is mostly plateau with rim of mountains.The climate is tropical; generally rainy with dry seasons (December to February, June to August); semiarid in northeast.

(most widely used of the Niger-Congo languages, preferred for native language publications in the capital and may be taught in school), other Niger-Congo languages, Nilo-Saharan languages, Swahili, Arabic.

Overview

The president, Yoweri Museveni, and his National Resistance Movement (NRM) will continue to dominate the political scene following a resounding victory in the February 2011 elections. There may be some limited outbreaks of civil unrest, but Mr Museveni has total control of the security forces, making wider political instability unlikely. Inflation is estimate to average 6.7% in 2013-15 owing to stable commodity prices and fiscal tightening. We expect it to increase to 15.4% in 2016 on the back of pre-election spending, before easing in 2017. The current-account deficit as a % of GDP is estimate to remain in double digits as import costs continue to increase owing to request for capital imports for infrastructure projects, notably in the energy sector.

Political outlook

Police raided the offices of two newspapers and two radio stations which published parts of a letter calling for an investigation into an alleged plot to assassinate people who discord with an alleged presidential succession plan. The media crackdown reflects the pressure on the government.

The president made some high-level personnel changes in the army and the police, and carried out a cabinet reshuffle, on May 23rd. Aronda Nyakairima was moved from chief of Defence Forces to internal affairs minister.
A leaked copy of the new statement of the UN Security Council's Group of Experts (GoE) alleges that Uganda have continued to support the M23 rebellion in eastern Democratic Republic of Congo (DRC). The government has threatened to withdraw its troops from all foreign peacekeeping initiatives. We believe that it is unlikely to carry out this threat, which is probably a bid to persuade the UN to alter the GoE statement.

Economic policy outlook

Uganda has agreed a successor programme for its policy support instrument with the IMF. It will focus on expanding instruments available to the central bank and improving public financial management.

The central bank cut the major policy rate from 12% to 11% on June 6th as the inflationary outlook improved.
The central bank rate has been lowered for months in a row, reaching 12.5% on November 1st. Further rate cuts are likely, but the balance is swinging towards protecting the currency, and the loosening cycle is nearing an end.

Economic forecast

Real GDP increase will be subdued in 2013 owing to a stagnation in public spending. It is estimate to accelerate to an average of 6.8% in 2014-16 as foreign investment rises, and 12.5% in 2017 as oil production starts.

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Outlook for 2013-17

• The president, Yoweri Museveni, and his National Resistance Movement (NRM) have ruled Uganda since 1986 and will continue to dominate the political scene following a resounding victory in the 2011 elections.
• The negotiation of oil contracts will prove controversial, and the opposition will seek to stoke public resentment over the perceived inequity and corruption involved in the deals that are struck.
• The Economist Intelligence Unit expects the fiscal deficit as a % of GDP to narrow to 2% in 2013/14 (July-June), before widening to 4% as the 2016 election looms, and narrowing thereafter.
• Real GDP increase will be subdued in 2013 owing to stagnant public spending. It is estimate to accelerate to 6.8% on average in 2014-16 as foreign investment and external request rise, and 12.5% in 2017 as oil production starts.
• Inflation is estimate to average 6.7% in 2013-15 owing to stable commodity prices and fiscal tightening. We expect it to increase to 15.4% in 2016 on the back of pre‑election spending, before easing in 2017.
• The current-account deficit as a % of GDP is estimate to remain in double digits as import costs continue to increase owing to request for capital imports for infrastructure projects, notably in the energy sector.

Review

• Police raided the offices of two newspapers and two radio stations that had published parts of a letter calling for an investigation into an alleged plot to assassinate people who discord with an alleged presidential succession plan.
• The media crackdown reflects the pressure that the government is under. The search was ostensibly intended to retrieve the original letter, but it appears to have been aimed at intimidating and harassing journalists.
• The president made some high-level personnel changes in the army and the police, and carried out a cabinet reshuffle, on May 23rd. Aronda Nyakairima was moved from chief of defence forces to internal affairs minister.
• Uganda has agreed a successor programme for its policy support instrument (May 2010‑August 2013) with the IMF. It will focus on expanding instruments available to the central bank and improving public financial management.
• A range of intended new revenue measures are likely to be introduced in the upcoming budget in July, inclunding an increase in fuel business, new levies on the telecommunications sector and improvements in administrative procedures.
• The central bank cut the major policy rate from 12% to 11% on June 6th. It outlined two key reasons for the decision: an development in the inflationary outlook and a desire to stimulate domestic request.