Country Report Uganda March 2011

Outlook for 2011-12: Policy trends

Uganda has maintained a high level of macroeconomic stability and economic growth during the past 20 years, but it needs to tackle bottlenecks in transport and energy infrastructure to boost employment and poverty reduction significantly. The government recognises this; a National Development Plan, covering the period from 2010 to 2015, projects a large increase in infrastructure spending. It focuses on the energy sector, where plans include the building of an oil refinery, an oil distribution network and hydroelectric power projects that would increase energy production by 3,500 mw.

The advent of oil revenue will transform economic policymaking, posing challenges for the maintenance of macroeconomic stability and improved transparency in government spending while placing greater pressure on poor public financial management systems. The full impact of this will not be felt until large-scale oil production begins (unlikely before 2012), although the government has already started to assert its economic independence with an increasingly independent stance on donor demands-for instance, it passed a USh600bn (US$320m) supplementary budget in January that was not consistent with the IMF policy support instrument. Government rhetoric about boosting agricultural productivity will continue but progress will be slow. In better news, the introduction of an EAC common market in mid-2010 will reduce barriers to trade, labour and investment, and recent land reforms will improve security of tenure, increasing the scope for investment, although a proposed EAC monetary union will prove over-ambitious.

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