Will Uganda attain the projected 7% economic growth in 2023?

Uganda is eyeing strong economic growth projections, with expectations of attaining a 7 per cent economic growth in 2023. The country anticipates a decline in its public debt ratios, buoyed by the prospect of hitting the 7 per cent mark once oil production commences in 2025. Despite these optimistic forecasts, concerns linger about Uganda's ability to achieve these targets amidst a challenging economic landscape. CNBC Africa engaged in a discussion with Alan Lwetabe, Director of Investments at Deposit Protection Fund Uganda, delving into the intricacies of Uganda's economic outlook and the factors influencing its growth trajectory. Key Points: 1. Debt Levels and Economic Performance: Uganda's debt to GDP ratio currently sits below 50 per cent, a threshold deemed manageable by the IMF. However, the high cost of debt servicing remains a significant concern for the government. With domestic bond interest rates at 15-16.5 per cent, there is a risk that a rise in debt ratios could divert funds towards servicing debt, curbing resources for critical social and community services. The challenge of expanding the tax base further compounds the issue, with revenue collection constraints impeding the government's fiscal capacity. 2. Growth Prospects Amidst Constraints: Despite the hurdles, Uganda's unique positioning as an agricultural hub with fertile soils and favorable climatic conditions presents a foundational strength for economic growth. The country's ability to sustainably feed its growing population, as evidenced by low inflation levels during the COVID-19 pandemic, bodes well for its economic resilience. However, the crowding out effect, driven by elevated government security interest rates, poses a risk to private sector financing and overall growth potential. 3. Trade Implications and Diversification Efforts: Recent tensions around Uganda's anti-LGBTQ legislation have sparked concerns, particularly in trade relations with the U.S. Some American firms operating under the African Growth and Opportunity Act (AGOA) have raised the prospect of halting imports from Uganda. While the full impact remains uncertain, considerable emphasis is being placed on fostering diversity, inclusion, and corporate responsibility within the private sector. Uganda's proactive measures to diversify revenue sources, including diaspora remittances, gold receipts, and tourism revenue, showcase potential avenues for offsetting any trade disruptions. Quote: Alan Lwetabe highlighted Uganda's resilience and growth potential, stating, '...given the existing fundamentals and the characteristics of the Ugandan economy, it should be able to comfortably grow at six to seven percent.' Uganda's economic landscape presents a complex tapestry of opportunities and challenges, with the country navigating a delicate balance between debt sustainability, revenue generation, and external dependencies. As Uganda continues its journey towards transforming its economic fortunes, proactive measures in fiscal management, trade relations, and sustainable growth strategies are pivotal in realizing its growth ambitions.