Uganda’s oil reserves may account for as much as four per cent of its economy annually in coming years if managed well, the International Monetary Fund’s (IMF) country chief says.
IMF Mission Chief for Uganda Axel Schimmelpfennig writes in a blog post that the country also needs some strategic infrastructure investment and better debt management.
Uganda’s economy has taken a hit over the past decade — particularly on a per capita basis — but is recovering.
According to IMF figures, growth was around 4.7 per cent in 2016, currently above average for Africa. That was up from just 2.6 per cent in 2011, but still well off its 10.4 per cent high as the global financial crisis broke.
The IMF projects gross domestic product will grow at 5.7 per cent in 2018, but Schimmelpfennig sees greater growth beyond.
“Drought in the Horn of Africa, regional conflict, and slow credit growth have contributed to (the decline), with per capita growth falling to half a per cent from an average of 5 per cent for the past 20 years,” he said in his blog post.
Per capita GDP — a closer measure of ordinary Ugandan’s conditions — has plunged in the past few years along with weakness in key exports such as tea, coffee and some minerals.
The shilling, Uganda’s currency, has also weakened, in particular during the run up to the February 2016 presidential election.
But with oil, all this could change.
“In our estimates the revenues could range on an annual basis from about half a per cent GDP initially to about 4 per cent at peak production, he says. “The challenge that many oil producers face is to manage this well.”
Uganda discovered commercial hydrocarbon deposits in the Albertine rift basin that straddles its border with the Democratic Republic of Congo in 2006. It estimates the deposits hold around 6.5 billion barrels of oil as well as commercial deposits of natural gas.
Production is due to start in 2020, after a number of years delay. An export pipeline is being developed and work is at the early stages of field development.
Schimmelpfennig said that if the government starts production as planned it could ‘reap the benefits’ for almost 30 years.
