Wednesday, 8 October 2014

GDP rebasing: It is ripe for Uganda( published in observer and newvision)

A long-standing measure of economic activity in any country is the Gross Domestic Product (GDP), which by definition is the total monetary value of goods and services produced with in the country over a period- mostly a year. It is often measured by the total sum of expenditure by key economic agents (firms, households/individuals and government) and net receipts from abroad (exports minus imports). However, it can also be measured by two other methods: by adding up all the value added in a given year or by adding up all the money earned (Income) each year. Theoretically all the three methods: expenditure, value added and income should be equal.  Governments use a combination of the three methods and rely on the GDP figure to shape their economic policies including the budget policies. Uganda uses all the three methods.


In the last couple of years, some African countries have rebased their GDP figure thrusting them into middle-income status. GDP rebasing is the changing from old base year price structure to a recent base year in compiling composition of GDP. It requires the national statistical offices to carry out a survey of businesses in different sectors and allocate weights to each sector based on the importance to the economy in the base year. Infact, most developed countries rebase their GDP and sector weights every five years in order to reflect the current structure of the economy in terms of consumption and production patterns. 


In 2010, Ghana revalued its economy from 1993 base to 2006, increasing its overall GDP by over 60%.  In April this year, Nigeria’s GDP rebased its GDP from 1990 base year to 2010 base year, increasing its GDP by 89% to $ 510 billion suddenly becoming Africa’s largest economy surpassing South Africa. Kenya in September this year revalued its base year from 2002 to 2009, which increased its GDP  by 25 per cent to $53.4 billion in 2013. Tanzania is also expected to rebase its economy from 2001 base year to 2007 and that should provide higher estimates than its current GDP.  


Uganda uses a base year of 2002 and since then the structure of the economy has vividly and substantially changed. The discovery of oil in 2006 is already changing the economic landscape, public investments have drastically increased since 2008, mobile money has since been introduced and grown exponentially, more banks and telecommunication players have entered the market, and there has been a heightened increase of foreign direct investments mainly to extractives, manufacturing and services sector. Supermarkets have replaced the omnipresent informal shops in urban areas, and the real estate has grown rapidly underpinned by the rapid growth in private sector. On the overall, over the last decade, Agriculture sector dominance in GDP composition has since dwindled over, while services and industry sector have picked up. As such, there is need to revalue the GDP base year to capture the economic developments in the national accounts.   


As of end June 2014, Uganda’s nominal GDP stood at $ 24.5 billion. By safely assuming that Uganda’s GDP would change by same rate (25%) as Kenya, the figure would increase to $ 30 billion implying a GDP per capita of $ 860 for the estimated 35 million Ugandans. This should still be short of the Middle-income threshold of $ 1000, which implies Uganda would still qualify for the concessionary loans. The higher GDP would also heighten investors’ expectations, at the plus of attracting more investments: both domestic and foreign

The rebasing will have implications on the other metrics that are often referenced to GDP. For example with in the EAC, Uganda has committed to  the performance criteria which requires  a fiscal deficit, including grants as a percentage of GDP of 3%, present value of public debt as a percent of GDP of an utmost 50% as well as the revenue to GDP ratio of about 24%.  Rebasing would mean a reduction in these ratios. For example, the already low revenue to GDP of 13% would reduce further but at same time, the lower debt to GDP ratio would mean more room for debt.

Lessons from other countries show that data matters more than methods in the revision exercise. Complete and meaningful revisions can take place only when data availability is improved. Uganda has a good foundation in the recently concluded Census and other household surveys. It is also important, it is done in an open and transparent manner, to minimise the risk of politicians hijacking the process for election purposes given that 2016 is in sight. Rebasing would also provide more accurate information to guide the next phase of GDP. Uganda we can- For God and my country.

Monday, 6 October 2014

The oil price slump trend not good news for Uganda (published in african

Published in africanexecutive magazine-  
In recent months, international oil prices have been dropping and there is a sense that it’s not a short-term drop. As of week beginning 6th October 2014, crude oil was less than $95/barrel. What is interesting is that the drop in the oil price is against the backdrop of on-going conflict in the Middle East; issues with Libya supply; conflict in South Sudan and even the Ebola outbreak in West Africa.  However, the growth in North American crude oil production attributed to shale boom in the US has offset fears of supply disruptions. The U.S. has become the world's largest producer of liquid petroleum and has in recent months, increased daily production relative to the top two oil giants Russia and Saudi Arabia. The plunge in oil prices is manifested in ample inventories, slackening demand and a U.S. dollar trading at multiyear highs.


Oil prices like many economic variables tend to be random walks meaning that they are unpredictable in the short run but some international factors provide some meaning guide on the trajectory. The prices are predicted to decline to lows of 80-85USD per barrel by end of year. Global demand is expected to remain subdued because of weaker-than-anticipated growth in China and Europe. The recent action by Saudi Arabia to cut prices is likely to trigger a price war.  Iran and Libya are expected to bring in more stable volumes to world market and in recent past, new drilling techniques such as hydrofracking should shove up production.


The fall in prices has short-term and long-term implications for Uganda.  In the shorterm, the consumers should be smiling all the way to pumps but at the same time lead to loss of government revenue. Sadly, though, the pump prices are yet to ease. Limited players in the fuel industry, as well structural, regulatory and institutional weakness, in part explain that.   In the long term, however it is not good news for Uganda. The  potential recoverable estimates are about 1.4billion barrels, and different estimates at a price of crude at 100 USD per barrel reveal potential annual oil revenues of up to 3bn dollars at peak production.


Like many oil rich developing economies, oil revenues will be increasingly an important financing source for public investment. Any potential shortfall in all revenues will definitely have macro-economic shocks on the economy. For example, during the oil price boom of 2003-06, Angola saved about 60 percent of the incremental increase in oil revenue, but as Oil prices stayed up, leading to the belief that they were permanent, spending increased sharply. From 2006 to 2008, Angola spent 140 percent of its additional oil revenue, more than most other low- and middle-income oil producers. By 2009, Angola faced growing macroeconomic instability against a backdrop of a significant oil price decline. In the Ugandan context, in recent past, there has been heightened fiscal (national budget) expansion increasingly funded by the expensive short-term domestic debt and market price external loans. For example, a single project the standard railway gauge is expected to cost Ugandans 8 billion dollars, 25% more than the current national budget of about 6billion dollars.  Arguably, this trend is driven by the expected windfall of oil revenues. Taking the spend-as-you-go approach forward could destabilize the economy and lead to the types of boom-bust cycles that many oil-dependent economies have suffered.


Needless to mention is the need to reinforce both the institutional and regulatory capacity in preparation of the windfall. The current legal framework provides for the allocation of future oil revenues to the national budget to be left to the discretion of parliament. The likely risk with this is paramount given the recent trend on the usage of supplementary budgets. In addition, the proposed law does not provide the set-up of the stabilisation fund, which should aim at setting up a mechanism by a government to insulate the domestic economy from large influxes of revenue, as from commodities such as oil. The fund is however envisaged in the regulations of the law.


The aforementioned estimates of oil revenues will not be large enough to be transformative; therefore, it calls for continued efforts to enhance the non-oil tax revenues. Sadly again, Uganda along with Burundi have the lowest tax revenue to GDP in the East African region. This will require innovative measures to enforce compliance with in the large and formal sectors (real estate, business services, hotels and restaurants, education) as well as the informal sector that pay little tax. Oil is often associated with windfall of capital flows, so Leakages from aggressive cross-border ‘profit shifting’ will need to be addressed.




Thursday, 2 October 2014

Persistent Current Account Deficits are costly in the Long run ( published in newvision october 2014)

When you visit most of the super markets chains in town, you notice the dominance of non-Ugandan products from the small items on the shelves such as toothpicks, honey, rice and mopping rugs to the big items such as furniture and other house accesories. When you enter other stores such as boutiques, hardware and carports, they are dominated by foreign goods too.  

To probably put this into perspective, the main sectors contributing to our national cake (in this case GDP) are services and manufacturing. Arguably, foreign players dominate these sectors.  This in part explains the increased foreign deposits as share of total deposits, reported by bank of Uganda at over 30 percent.   This is manifested in the persistent current account deficit, meaning more imports more than exports (Trade deficit) –although the current account also includes net income (such as interest and dividends) and transfers from abroad (such as foreign aid), which are usually a small fraction of the total.  The current account deficit also implies that Uganda’s national savings are less than national investments. As such, Uganda’s investments are largely financed by borrowed foreign capital.

In spite of the current account deficits, Uganda is one of the fastest growing economies in Africa. This is mainly because Uganda’s current account deficits are financed by foreign direct investments. As of 2012, Uganda enjoys the highest FDI by volume in the East African region at 1.72bn dollars and are projected to increase in the next few years in preparation for the oil sector. A positive inflow of foreign direct investment is a major source of technology transfer and a boost for economic growth and development in many developing countries.This implies that current account deficits are not always bad.  For example, the United States of America (USA), the world’s biggest economy, has persistently operated current account deficits. 


While some trade theorists argue that, there is no reason why one should not import today (run a deficit) and export tomorrow, the increased magnitude of Uganda’s current account deficit at over 2.4 billion dollars( over 11% of GDP) could prove to be harmful in the long run. When a country runs a current account deficit, it is building up liabilities to the rest of the world that are financed by foreign inflows or capital. In Uganda’s case, the Foreign Direct Investments that largely facilitate the current account deficits are mainly skewed towards the services, manufacturing sector, and not the agricultural sector. The linkages with the agricultural sector remain very weak, prompting the growing sectors to import some of the basic agricultural products.  The perseverance of weak linkages implies that the possibility of reversal of the trade deficits will remain a toll order.



 Also, a current account deficit exposes the exchange rate to volatility, inevitably weakening the Uganda Shilling against the dollar. For instance, the current account deficit from 5.5 percent of GDP in 2007 to over 12 percent in 2013 and this coincides with depreciation of the Uganda Shilling from 1710 UGX per 1 USD in January 2008 to over 2500 UGX per 1 USD in 2014. Furthermore, the volatility of the exchange rate complicates the conduct of monetary policy because it is untenable for central bank in the short run, to simultaneously maintain an open current account, target the exchange rate and maintain an independent monetary policy.


A country with current account surplus stands a better chance to weather economic shocks. For example, the world’s second biggest economy China has become a financial and trade power, in part, by keeping a current account surplus by maintaining its trade surplus artificially high. The same goes for Germany, Norway and Netherlands. While those with deficit such as Portugal, Ireland, Greece and Spain have suffered the consequences of imprudence.  As such, Uganda’s current account deficit signals to undesirable costs in long run. A careful examination of the composition of Uganda’s imports will reveal that some of the products imported should be manufactured domestically. East Africa Community (EAC) provides a market for consumption of Uganda’s manufactures. For example, Kenya is a net importer of Maize from outside EAC. Therefore, Agro processing in Uganda needs more attention than ever before. Some research studies recommend careful introduction of capital controls in awake of increased cross border capital movements. 


Thursday, 22 May 2014

Monetary Policy in Uganda may be sound but risks futility.

Since independence, Uganda has recorded at least as many shifts in policy as, there have been regime changes including the shift from direct controls (on interest rates and credit) pre 1993, to indirect monetary policy control as part of the financial sector liberalization process undertaken under the IMF Structural Adjustment Programmes. Prudent macroeconomic management helped by economic reforms, particularly better monetary policies, have contributed to an improvement in macroeconomic performance in Uganda since the early 1990s, manifested in higher real GDP growth rates and lower inflation.

In 1993, when BOU assumed its primary responsibility as the formulation and implementation of monetary policy, the Bank adopted the Reserve Money Programme (RMP) as the operating framework to facilitate indirect monetary control. This RMP remained the guiding framework until June 2011 and was premised on monetarism school of economic thought, which maintains that the money supply (the total amount of money in an economy) is the chief determinant of current GDP in the short run and the price level over longer periods. 


In July 2011, the base money targeting was replaced by “inflation targeting lite”. The most important consequence of the change in monetary policy regime is that the operating instrument for monetary policy became an interest rate dubbed the central bank rate (CBR), rather than the monetary base. Under the new regime, the CBR is the operating target of monetary policy, which is set monthly and announced through published monthly monetary policy statements.


Monetary policy is typically the rst line of defence against a number of internal and external shocks that a country faces or is exposed to, so it is important to get it right. While inflation targeting has been successful at reducing inflation from double to single digit(s), the designing of monetary policy frameworks in a bid to achieve its objectives of low inflation and full employment output as well maintain that nancial stability faces a number of challenges.


First, there is fear of the growing disharmony between the fiscal (budget) policy and the monetary policy. While the monetary policy CBR would be set lower than the current  11.5% for the last six months to boost private sector credit, the increased government presence on the domestic debt would defeat this objective as the associated yields on the government risk free paper(e.g. Treasury bills) would make attract banks to invest in government securities rather than lend to private sector a phenomenon known as crowding out effect. The Bank of Uganda Governor in his speech at the annual dinner of Uganda’s Bankers’ Association indicated that the primary auctions of government securities are now used to fund the government domestic borrowing requirement and to refinance the existing stock of securities as they mature rather than as instrument of monetary policy . As matter of fact, between 2007 and 2012, Uganda’s domestic debt stock picked up from 9% to 13.1% of GDP and it is by no surprise that the interest payments on debt as share of the budget accounts for over 8% of the budget (more than twice the agricultural budget).


A common institutional constraint in most developing countries is the lack of central bank independence. Over the last few years, monetary policy costs have grown to account for 30% of bank’s total operating expenditure. Some of the monetary costs relate to the fiscal policy operations. If domestic interest rates do not come down given the still low returns on BoU reserves,  BoU’s capital is at risk of  getting eroded away which undermines the credibility of monetary policy.


Second, the attainment multiple objectives:, with concerns about the path and volatility of the exchange rate still playing a dominant role amongst private actors, is a challenges for Monetary policy. With an open capital account, it is not possible to have independent monetary policy when the central bank is also trying to manage the exchange rate a phenomenon known as “the impossible trinity”. This is because the central bank lose control over money supply.  On price and output objectives, the governor too has been on record saying that in the circumstances when the economy is faced with supply shock as was the case in 2011, there was an unavoidable conflict between achieving both inflation and output targets. In that particular circumstance, the inflation target takes precedence even at cost of private sector growth, an issue which private actors need to comprehend.


There are a number of other factors that constrain the conduct of monetary policy in Uganda including but not limited to; the low levels of financial development for example limited access to formal financial services (thanks to the growing level of financial innovation e.g. mobile money), and low levels of trading on the secondary securities markets all of which constrain monetary transmission mechanism, global exogenous shocks ( including fuel and food prices) and the transition to the East African Monetary Union. In addition, the greater dollarization (ratio of foreign currency deposits to the total deposits at 33.8% of total deposits as at december 2013) of the economy, limits the scope there is for an independent monetary policy.


Without addressing the challenges head on, especially institutional reforms at BoU to strengthen its independence, the transition to a modern monetary policy may be futile.  

Friday, 29 November 2013

Economic Benefits are REAL but FROM REAL- Uganda Oil Economics

Often time transparency and accountability dominate the oil discussion among the key stakeholders, with limited attention paid to the economic consequences. The two are necessary but not sufficient for sustainable management of the resource and are arguably strongly correlated negative economic consequences including the oil curse.

If you remember where you were and how you felt when Uganda discovered its oil in 2006, optimism was on the lips of many Ugandans. Today there is a sect of the population that would prefer to have the oil remain in the ground than being out. Uganda enjoyed commendable macro-economic stability from the early 1990s to mid-2000s or late 2000s but since then the economy faced some hard times including the 20 year low record economy growth of 3.2% and record high inflation of 30.7% in financial year 2011/12. It is also notable that annual exchange rate (bureau mid-rate) has depreciated from 1$ =1772 Ug. Shs in financial year 2006/07 to 1$ =2585 Ug. Shs the last financial year. The exchange rate is expected to depreciate further in the next couple of years. This calls for investing in enhancing the non-oil sector export competiveness.

In 2006, Uganda’s debt burden was reduced from $4.1bn to $1.6bn under the World Bank/IMF led Highly-Indebted Poor Countries (HIPC) Initiative. However, the debt stock has already shot back to the 2006 levels.  In this current financial year – Uganda intends to borrow 1 trillion shilling from the domestic market. In the same year, the interest bill accounts for almost the same amount in our current appropriated budget. This represents 7.5% of the national budget and is more than the share appropriated to either health sector. Despite recent assessments showing that Uganda’s debt is sustainable, it is evident that the cost of the debt is on the rise. Depending on which school of thought one subscribes to, some argue that this rising trend is due to the expectations of future oil revenues.

This period of economic challenges coincides with the period oil was discovered in 2006. Hypothetically it is arguable that there is a correlation between the discovery of oil and the economic trend over the period.

Prospectively Uganda will defacto face some economic challenges ahead of oil extraction. The first challenge is the high expectations that oil has cast on Ugandans. The recent tullow Oil report indicates that 150,000 Jobs both direct and indirectly. It is also worth noting that Uganda average churns out about 400,000 from its higher levels of education (universities, tertially). According to Uganda National household survey 2009/10, the unemployed were 480,300 – accounting for of 4.2% of the labor force. Evidently the oil jobs will not significantly bridge the unemployment gap. 

 Related is the skeweness of the economic activity towards oil, likely leading to slow progress.  Over the last 7 years, it is noted that the services and manufacturing sectors that have strong linkages with oil sector increasingly account for the economy cake relative to agriculture.  Commendably Uganda has enacted a local content policy, but this also risks skewing attention to the oil sector. It is of critical importance that the next development plan incorporates a holistic plan of the economy local content which incorporates the oil local content.

On a positive side, the Oil revenue management policy envisages the economic challenges associated with the oil revenue management and proposes measures to address them and has developed a public finance bill, once passed will operationalize the management of the bill. The bill was submitted to parliament in March 2012 and is yet to be passed. A set of 55 amendments have since been re submitted to the responsible parliament session committee for consideration. The delays in passing the bill has its own economic implications including the delay in setting up the respective institutions and structures the bill intends to create, consequently the oil production. Further delays of oil production beyond 2018 will compound the recovery costs.

Oil is a finite resource and its prices are highly volatile. Worryingly, the proposed law does envisage creation of the stabilization fund. The stabilization fund, aims to……. It is indeed important to follow up the recommendation of the ORMP and ensure that pricing stability /benchmarking mechanisms are to be put in place. A pricing committee could be established to consult the Government and Parliament on medium term oil price projections with a view to smoothing future spending based on expected oil receipts.

 There are some best practice cases for Uganda including my employers Norway who have been in the oil business for 40 years and boast of over of oil fund reserves of 760bn dollars for just 5 million people. The reserves by any standard are astronomical more so compared to Uganda forex reserves of 3-4 bn reserves. The key has been in the Norwegian model is that Legislation and institutional framework must be correct. Capacity should be built while enabling all actors to perform their roles especially the institutions responsible for the management of the resources



Tuesday, 26 November 2013

Shared benefits for all require openness about oil resources( published in vision 26th november 2013)


The 3.5 Billion barrels reserves of Oil find present Uganda with an opportunity of windfall revenue when oil production commences. Commercial production is expected to commence 2017 and the estimates of oil revenues are in the range of 2- 3.5 Billion dollars per annuam which is more than 50% of the current cumulative national debt. The current reserves are expected to last 20-24 years if production is at 200,000 bpd.  In essence, if oil revenues are managed well, they will not only go a long way in leveraging Uganda from its debt, but will also deliver critical development infrastructure.

Oil Revenue Management will be guided by the Oil Revenue Management Policy (2012) and the Public Finance Bill (PFB) currently before parliament. The proposed law provides for a single petroleum fund in Bank of Uganda (BoU) where all oil revenue collections will be deposited. All oil revenue collections and administration will be done by Uganda Revenue Authority while the Ministry of Finance, Planning and Economic Development will be in charge of the petroleum fund with a delegated authority of management of the petroleum funds to BoU.

The Petroleum fund has twin objectives of financing the budget and Investing/saving for future Generations. The withdrawal of funds to cater for the national budget will be through Parliamentary approval on a year-by-year basis. In the short run, the oil funds will be limited to funding the non-oil Budget deficit agreed as part of the Budget process.   The withdrawals of petroleum funds to the budget left to discretion of Parliament presents a clear risk that political pressure that could result in revenues being spent rather than invested.

The funds that then remain on the petroleum fund will be invested in accordance with the petroleum revenue investment policy issued by the Minister in consultation with the Secretary to the Treasury and on the advice of the Investment Advisory Committee. The members of the Investment Advisory Committee shall be appointed by the Minister after approved by Parliament.  The future savings provision withstanding, the bill does not explicitly provide for the stabilization fund which would provide a steady level of government revenue in the face of oil price fluctuations.

There are various forms of accountability and transparency provided in current bill which include the Minister tabling table the annual report to parliament. The Office of the auditor general will audit both the funds on the petroleum fund and the funds transferred to the budget and present annual reports to Parliament.


The proposed legal framework provides Uganda a strong foundation for management of oil revenues; however the main challenge lies in the implementation of its laws. The implementation gap between policies and regulatory frameworks on the one hand, and actual performance on the other must not be allowed for the petroleum sector in Uganda.

The legal framework provides the necessary foundation but to realize full benefits, open transparency is key- information for all. As much as the proposed law requires the Government of Uganda (GOU) to publish incoming revenue receipts, it does not specify how reported receipts will be disaggregated, nor does it require companies to publicly disclose the payments that they make to the GOU. A critical and more urgent action for Uganda is to adhere to the International standards of transparency. An example of these International standards is the Extractive Industries Transparency Initiative (EITI) which requires its member Countries to publish all payments made by oil, gas, and mining companies to government, and all revenues received by the government from those companies.  EITI implementers also commit to closely involving civil society in the design and monitoring of the EITI process. Also the Dodd-Frank Act in the US and the Accounting and Transparency Directives in the EU require all private oil companies that fall under the jurisdiction of these requirements to publish annually details of all revenue payments to the host governments, including taxes, royalties, licensing fees and bonuses.

If the Uganda truly intends to join the EITI, as it has repeatedly stated by President and the respective ministers, it perhaps makes logical sense, harmonizing its reporting requirements with the EITI Standard   in order to limit administrative burden going forward. In fact some international companies, including Tullow Oil, Total E&P, Dominion Petroleum and CNOOC will be required to report their payments to the GOU by virtue of their stock exchange listings or home jurisdiction law. As such, it would be wise to include a requirement in the Public Finance Bill to require companies to declare their payments to the GOU in line with international transparency requirements.  In fact, Ghana which signed to the EITI in 2003 has a separate EITI bill.


EITI compliance helps to prevent oil, gas or mining revenues being mismanaged or lost to corruption. Experience shows it also leads to improvements in the tax collection process and boosts public finances as it has in Ghana and Nigeria. Nigeria’s first EITI audit report found a discrepancy of $230 million between what the companies reported to have paid, and what the Nigerian Central Bank reported to have received.


To attain shared benefits for all from oil, it requires shared information for all. Informed citizenry, civil society organisations and the media are and will be crucial healthy transparency and accountability organs



Tuesday, 10 September 2013

No Emperical Literature supports the Ugandan Economic Consolidation arguement

No Emperical Literature supports the Economic Consolidation arguement by Morrison Rwakakamba
On reading Rwakakamba Morrison( a newly appointed special presidential assistant on research) article in the Newvision Thursday 5th september 2013 and in african executive magazine- " on Uganda certainly needs no constitutional crisis" I am only tempted to pen down a response just to enrich the debate. This paper attempts to address issues raised by Angelo in his paper- While the debate focused on constitutional crisis,Rwakakamba delved to a great extent the economic transformation of the economy from 1986 to date. As an economist,i will  restrict my reaction to the economic arguments by Morrison. Here are my 3 arguements;
1. Morrison is quick to allude to economic consolidation highlighting that Uganda’s economy has grown by 0ver 80 times in 26 years. In essence the economy has grown at 80/26 times annually in nominal terms. This again wouldn’t be the economic consolidation. The measures of economic consolidation range from the basic Income per capita to Human development index. The figures on GDP per capita show that Uganda has grown from about 280 dollars in 1986 to about 560 dollars i.e. is Uganda GDP per capita has only been able to double in 25years or so. If the same trend is one to go by- Uganda would attain lower middle income in next 25 years (at 1000 USD for GDP per capita).The poverty figure comparison with the East Africa economies is only blind at the fact that the rate at which Ugandan government has reduced poverty is slower than the rate at which population is growing. To illustrate the point- in 1986/1990 with about 12/14 million people, our poverty levels were 56% - making it about 7-8 million people poor. Today at 25%-30% of 35 million Ugandans are poor, that 9-10 million poor people. In a nutshell in no empirical literature is it enshrined that Uganda has attained economic consolidation like Morrison stipulates.
2. Uganda debt levels as assessed by IMF and World Bank are sustainable- This is in sync with Morrison's arguements. But we shouldn’t be blind of the fact that there are also key risks. One of them is the rise in domestic borrowing or risein levels of non concessional loans.In this current FY, Uganda intends to borrow 1 Trillion from the Financial Markets domestically. this should have a huge impact on the movement of interest rates and foreign exchange rates.To illustrate this further, the interest bill in the current financial is a significant share of the budget. At almost 1 trillion, this represents 8% of the budget and twice the budget of agriculture that employs 70% of Ugandan labour force. Who are loans trickling down too? Again the interest bill of 1 trillion as a share of the cumulative debt of 15 trillion means that Uganda is paying almost 7% interest annually. By all means this is not concessional rate. Also lets not forget that also notably In mid-1990’s, Uganda was classified as one of the most highly-indebted poor countries with unsustainable debt burden because it could not pay its debt. Following the accumulation of a debt stock of $3.6bn, Uganda became the first eligible country under the World Bank/IMF led Highly-Indebted Poor Countries (HIPC) initiative to reduce the debt burden, to receive a debt relief amounting to $2bn.Unfortunately, the debt stock shot up again in 2006 to $4.1bn prompting another debt cancellation under the enhanced HIPC initiative. Under the initiative, Uganda’s debt burden was reduced from $4.1bn to $1.6bn.
3. The debate on oil benefits to all is a timely one, but unless Uganda addresses its large implementation gap of policies and laws as well the skewedness towards power consolidation, oil will be as good as any revenue flows in an ineffective system.  Again the oil envisaged resources are significant  projected at 3.5 Bn dollars per annum for about  24 years BUT  not sufficient to uplift Ugandans upper middle income( see uganda's fiscal regime note - in my preceeding blog note for my calculations).
In a nutshell the arguements for economic consolidation are flawed, a simple illustration is a detailed review of the MDG progress beyond just the absolute targets but rather the relative progress.