Uganda’s economy is projected to grow between 0.4 percent and 1.7 percent this year compared to 5.6 percent in 2019, a new report by the World Bank has shown.
The report dubbed “Uganda Economic Update” issued here on Wednesday showed that the fall in the growth figures is largely attributed to the COVID-19 pandemic, which caused economic and social disruption, a desert locust invasion and floods.
Up to 3 million Ugandans, according to the report, could fall into poverty due to economic hardship and a lack of alternative means of survival.
The survey indicated that global and local restrictions in the movement of people and goods and provision of services to contain the COVID-19 pandemic have resulted in lower consumption, loss of jobs and a 43 percent reduction in remittances.
Due to a sharp drop in tax revenues, Uganda has also been forced to borrow much more to continue providing services, according to the report.
The bank said despite the increased borrowing, the country remains at low risk of debt distress based on the April 2020 joint World Bank-International Monetary Fund debt sustainability analysis.
The report said with total debt service (interest and principal due) expected to average around 55 percent of government revenues over the next three years, there is a need to cut back on non-priority spending in order to provide essential public services such as health, education, water and sanitation, as well as electricity.
It warned that a more widespread pandemic could pose significant risks to the outlook, as well as any further significant locust invasion. The northern, northeastern and eastern parts of the country are facing a third wave of the crop-destructive migratory insects from neighboring Kenya.
Weak economic growth in the post COVID-19 period will continue to reduce overall consumption and commodity demand, according to the report.
The external inflationary pressures that the country will face will be limited as crude oil prices are expected to average 35 U.S. dollars per barrel this year and 42 dollars per barrel in 2021.
These prices however are below the estimated breakeven price of 60 dollars for oil production in Uganda. This could negatively impact Uganda’s prospects of becoming an oil producer within the next four to five years, according to the report. Enditem