FDI to Kampala rises to $358m

Saturday October 12 2013

By MARTIN LUTHER OKETCH Special Correspondent

Uganda posted a 25.6 per cent rise in foreign direct investments (FDI), grossing $358 million in the three months to August 2013.

Data released by the Bank of Uganda (BoU) shows that the country had registered FDI of $285.3 million in the preceding three-month period.

BoU executive director for research Adam Mugume attributed the positive momentum to ongoing investment in the oil sector and infrastructure development, specifically in electricity and roads.

Statistics show that Uganda recorded a $6.6 million surplus in its capital account between March and May, which then rose to $9.2 million in the June to August period.

Dr Mugume said the capital and financial account, which stood at $552.9 million between March and May, rose to $782.1 million between June and August.

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However, while there was an increase in the level of FDI, Uganda’s current account deteriorated to $717 million in the three months to August, compared with $379 million in the three months ended May 2013.

Uganda continues to import more than it exports. For example, between March and May, the country’s import bill stood at $1.21 billion compared with its export volume of $744.6 million.

Between June and August, Uganda’s import bill stood at $1.3 billion compared with its export value of $707.5 million.

Dr Mugume said the “surplus on the capital and financial account helped to finance the deficit on the current account. The surplus in the financial account increased to $791 million in the three months to August 2013.”

The surplus was driven by higher FDI and other investments inflows.

“An increased FDI inflow has been seen in the mining sector. The surplus on other investments was mainly driven by higher loan disbursements for budget support and project aid of $246 million in the three months to August, compared with the $100 million in the preceding period,” said Dr Mugume.

The State of the Economy report by the BoU shows that the country now receives a total of $131.45 million a month, which it says is driving Kampala’s economic growth upward.

The economy remains on track to achieve growth projected at 6 per cent for the fiscal year 2013/14, driven mainly by the services sector and increased FDI.

This development coincides with the new World Bank report titled Africa’s Pulse, released on October 7 in Washington DC. The report shows that FDI to the region has increased steadily in recent years, and are projected to reach about $40 billion this year.

Capital inflows into EA

“These inflows accounted for over 50 per cent of total capital flows to the region in 2010-12. FDI continues to be the largest source of capital flows to the region and an important source of funding for current account deficits, although its share in the total has been declining as other private flows have expanded,” noted the report. 

Africa’s Pulse is a biannual analysis of the issues shaping Africa’s economic prospects. In 2012, Africa’s Pulse revealed that the FDI inflows into sub-Saharan Africa stood at $37.7 billion.

Besides strong FDI inflows, Africa’s Pulse also reveals that $33 billion private capital investment was registered this year, up from $31 billion that was recorded in 2012.

Sub-Saharan African economies grew by 4.2 per cent in 2012. The latest World Bank report says GDP growth in sub-Saharan Africa is projected to strengthen to 4.9 per cent this year.

“Buoyed by rising private investments in the region and remittances now worth $33 billion a year supporting household incomes, GDP growth in Africa will continue to rise and reach 5.3 per cent in 2014, and 5.5 per cent in 2015. Strong government investments and higher production in the mineral resources and agricultural sectors will aid this growth,” notes Africa’s Pulse.

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