Foreign Investment to Uganda Likely to Increase – World Bank

1957 Views Kampala, Uganda

In short
In its latest report “Africa Pulse” the World Bank made the projection that Foreign Direct Investment (FDI) to Uganda will increase, mainly driven by investment in the oil and gas sector.

In Uganda’s current budget, there is increased expenditure on roads and energy infrastructure, which has led to the rise in public investment. This has also attracted investment from foreign companies that have won contracts to work on this infrastructure. In its latest report “Africa Pulse” the World Bank made the projection that Foreign Direct Investment (FDI) to Uganda will increase, mainly driven by investment in the oil and gas sector.

The rise in investment is also expected to lead to an increase in economic growth, the World Bank has projected. A rise in household spending is also expected to boost growth. Capital flows for FDI to Uganda, according to Bank of Uganda statistics dropped by 6percent t0 1.1bn United States Dollars in 2013, after increasing by more than 100percent between 2011 and 2012.

The World Bank also projected a rise in household expenditure, often referred to as domestic demand. This expenditure is already on the rise as according to the central bank, lending to households has been increasing compared to loans to the real estate sector, which have stagnated.

Uganda is projected to grow by 6percent in 2013/14, up from 5.6percent in 2012/13, a projection by both BOU and the International Monetary Fund (IMF). Rachael Sebudde, a Senior Economist at the World Bank Uganda Country Office says Uganda’s growth is still “good enough” to attract further foreign investment. This after investor confidence warning signals after the signing of the Anti-Homosexuality Act. 

//Cue in: I’ve heard the projection…
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The World Bank also credited Uganda for the diversification of exports to include flowers, fresh fruits and vegetables, and fresh and frozen fish. This, the World Bank says helped “facilitate export growth and the development and revival of nontraditional agricultural exports; a drop in coffee prices, which encouraged producers to switch to other sectors; diverse initiatives from international donors; and regional integration and pacification of neighbouring countries, which opened opportunities in new markets.”

Sebudde notes an improvement in the income of people involved in the agriculture sector. She however warned that with the increasing population, production must increase if Uganda is to have inclusive growth.

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Uganda however still faces some risks, mostly global that are likely to affect the growth projection. According to the report, Uganda would be mostly affected by rising food prices and currency depreciation. Already, inflation increased to 7.1percent in March 2014 as a result of rising food crop prices. The Uganda Shilling has also depreciated by about 2.5percent since the beginning of 2014.

The report also sighted political instability in places such as South Sudan, Uganda’s largest export market, could continue to affect trade.