Uganda Uganda at a Glance: 2004-05
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Country Report Uganda Uganda at a glance: 2004-05 OVERVIEW The political environment in Uganda is on the verge of change as the country prepares for a return to multiparty politics. Despite disagreement within the cabinet, the president, Yoweri Museveni, is expected to secure the constitutional change necessary for him to stand for a third term in office. The opposition parties are beginning to get their act together, and are expected to pose a stiff challenge at the presidential and legislative elections scheduled for 2006. Nevertheless, Mr Museveni and his reconstituted Movement party are likely to retain their strong grip on power and win the elections. The peace agreement in Sudan and technical assistance from the US are expected to help the Uganda People!s Defence Forces (UPDF, the Ugandan army) in its struggle against the rebel group known as the Lord!s Resistance Army (LRA). Economic reforms will continue to shape policy. Average inflation is forecast to fall to 3.5% in 2004, with strong agricultural production keeping food prices down, before rising slightly in 2005, to 4.5%, as food prices creep up and the price of imports increases as the shilling depreciates. The Economist Intelligence Unit forecasts a deterioration in the current-account deficit, to 8.3% 0f GDP in 2004 and 9.6% of GDP in 2005, as a more robust economy and strong exchange rate lift import demand. Key changes from last month Political outlook • The have been no major changes to our political outlook. Economic policy outlook • The finance minister, Gerald Ssendaula, presented the budget for fiscal year 2004/05 (July-June) on June 10th. Total government expenditure is expected to rise by 7.8%, whilst total domestic revenue is forecast to increase by 12%. The projected increase in revenue is mainly due to higher tax revenue. A large fiscal deficit, projected at 11% of GDP, excluding grants, will be financed mainly by donor support. Grants are forecast to account for about 30% of total fiscal revenue. Economic forecast • Real GDP growth for 2004 and 2005 is forecast at 5.5% and 6% respectively, up from our previous forecasts of 5% and 5.6%, mainly because we expect stronger agricultural performance to drive increases in private consumption and exports. July 2004 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. 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Uganda 1 Contents Uganda 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2004-05 7 Political outlook 8 Economic policy outlook 10 Economic forecast 13 The political scene 19 Economic policy 24 The domestic economy 24 Economic trends 27 Agriculture 27 Energy 29 Foreign trade and payments List of tables 10 International assumptions summary 12 Forecast summary 21 Government finances, 2004/05 25 Government finances, 2003/04 26 Monetary indicators 30 External trade account List of figures 12 Gross domestic product 12 Consumer price inflation 26 Consumer prices Country Report July 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004 Uganda 3 Uganda July 2004 Summary Outlook for 2004-05 The president, Yoweri Museveni, and his Movement-led government are expected to remain in office throughout the forecast period. Although the opposition parties appear to have realised that they need to work hard to eliminate their internal problems, it is likely that Mr Museveni, who is expected to be allowed to stand for a third term, and his reconstituted Movement party will win the presidential and legislative elections expected in 2006. Real GDP growth rates of 9-10% per year are required to make a strong impact on poverty, and although the government will continue to pursue many of the reforms advocated by donors, it is unlikely to execute the bolder reforms needed to raise the growth rate to such a level. Growth will, therefore, remain in the range of 5-6% per year over the forecast period, supported by strong export performance and continued growth in manufacturing and construction. The political scene The contentious issue of altering the constitution to remove the two-term limit on the presidency, thus allowing Mr Museveni to stand again, is causing much debate in Uganda. It has yet to be decided how a "third term" can be implemented without causing a political furore, but a referendum would seem to be the president!s preferred option, as parliamentary backing for him is far from certain. The recent signing of a power-sharing agreement in Sudan was welcomed by Uganda. Senior officials hope that the establishment of one authority in southern Sudan, including the area bordering Uganda, will quickly translate into success against the rebel group, the Lord!s Resistance Army. Economic policy The finance minister, Gerald Ssendaula, presented the budget for fiscal year 2004/05 (July-June) on June 10th. A large fiscal deficit, projected at 11% of GDP excluding grants, will be funded mainly through donor support. Donors rejected the draft proposals for the budget, stating that key expenditure elements, notably those for defence and public administration, were too high, and, once again, the Ugandan government was forced to make cuts. The domestic economy Uganda has continued to benefit from a strong economy, with real GDP growth for financial year 2003/04 estimated at 6.0%, up from 5.2% in 2002/03. Although this rate is still below the government!s target of 7.0%, it compares favourably with the overall growth rate for Sub-Saharan Africa of 2.7%. Stable food prices and exchange rates have continued to support low inflation. Foreign trade and payments Export figures for fiscal year 2003/04 appear extremely impressive. Total export earnings for goods and services increased by 20% to US$928m, from US$774m in 2002/03, owing to strong growth of non-coffee exports. Editors: Philip Walker (editor); Pratibha Thaker (consulting editor) Editorial closing date: June 25th 2004 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report July 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004 4 Uganda Political structure Official name Republic of Uganda Form of state Unitary republic Legal system Based on English common law and the 1995 constitution National legislature Parliament of Uganda; 282 members: 214 are elected by universal suffrage; the remainder are selected by electoral colleges; all serve five years National elections March 2001 (presidential) and June 2001 (legislative); next elections due in early 2006 (presidential) and mid-2006 (legislative) Head of state President, elected by universal suffrage for a five-year term National government The president and his appointed cabinet; most recent reshuffle in September 2000 Main political parties Anticipating a return to a party system during 2004/05, the ruling authority, the Movement, has registered as a political party under its original name, the National Resistance Movement. Of the traditional parties, the Uganda People’s Congress (UPC), the Democratic Party (DP) and the Conservative Party (CP) have also registered, together with a number of new parties whose support is likely to be very small. Reform Agenda is not yet a party, but could be significant if it decides to register President