President Yoweri Museveni on Thursday painted a bright future for Uganda’s economy, which he projected to grow to billions of dollars in “a short time” riding on the newly launched oil drilling in the western part of the country, value addition and continued investments in infrastructure.
Uganda’s first drilling rig for Kingfisher oilfield went live this week and the government expects to make an estimated $66 billion in revenues from upstream activity and a further $3.7 billion in proceeds from the pipeline and refinery operations over 25 years.
By end of June, President Museveni, who celebrated 37 years in power this past week, says Uganda’s economy will have grown from Ush162.1 trillion ($45.7 billion) for the financial year ending June 30, 2022, to $48 billion. The economy registered a growth of 4.6 percent this financial year up from 3.5 percent of last year.
Advice on wealth creation
Addressing the National Resistance Movement party followers, diplomats, armed forces and residents at Kakeeka, 180km west of Kampala, President Museveni said while the government has worked on roads, the people have to take up his advice on wealth creation.
“We now have the electricity and we are adding more, we have the varied and massive raw materials and, increasingly, we have the entrepreneurs — local and foreign and we have the African market that we have put in place with our pan-Africanist comrades,” said Museveni.
“This low middle-income economy we are now talking about, is still mainly a raw materials producing economy, where for a kilogramme of coffee, we get $2 (Ush7,380) for bean coffee while the wiser foreigners who roast the coffee, grind it and pack it for sale in supermarkets, get $50 (Ush184,000) for the same kilogramme. I have, finally, woken up some Ugandans from this sleep of ignorance.”
Commodities for processing
Museveni named coffee, cotton, maize, forest products and minerals as some of the commodities lined up for processing.
The country looks at developing its petrochemical industry from the oil drilling and development such as polymer and fertiliser industries as well as agro-processors at Kabaale Industrial park in Kikuube district, western Uganda.
Uganda is also riding on GDP per capita expected to reach $1,067 in June 2023, above $1,039, the threshold of middle-income status, which Museveni announced last year and insists if the economy keeps above the figure for three years, the country will be declared a middle-income country.
However, not everyone agrees with the president.
Opposition leader Wafula Oguttu says there is nothing new to expect. “Use social indicators or accessibility to basic needs of life and you will see that majority of Ugandans are still very far from earning that $1,000 (Ush3.6 million) something per year,” he says.
Struggle to meet obligations
The government has struggled to meet its obligations this year, including paying salaries, following infrastructure schedules and servicing loans, which Finance minister Matia Kasaija at the end of last year described as a crisis fuelled by rising cost of living and increasing prices of essential commodities created uncertainties in the economic outlook.
Experts and financiers have warned that the country was moving into a red zone in borrowing after it crossed the 50 per cent red mark of GDP ratio by the end of last year at a time when the government expenditure surpasses its tax collections.
“It is estimated that the potential revenue collection is between 16 to 18 percent of GDP highlighting a significant gap to be covered in revenue collection. In addition, compared to the neighbouring countries in the region, Uganda’s revenue collection effort remains low,” reads the parliamentary budget committee report.
Committee vice-chairman Wamakuyu Mudimi says the wide range of exemptions and deductions granted to investors has resulted in lower tax revenue.
“Over the past six financial years, the value of revenue foregone due to tax exemptions has increased from around 0.87 per cent of GDP in the financial year 2016/2017 to 1.56 percent of GDP in the financial year 2021/2022.”