{Uganda should stagger its planned energy and transport projects to avoid fuelling inflation and hogging bank credit, an International Monetary Fund (IMF) official told Reuters on Thursday.}<\/p>\n
A prospective crude producer, Uganda is at various stages of implementing several multi-billion dollar infrastructure projects, including two hydropower dams, a refinery, express highways and a railway line.<\/p>\n
The projects, officials say, are vital for maximising benefits from the burgeoning hydrocarbons industry and removing bottlenecks to industrialisation.<\/p>\n
IMF’s Senior Resident Representative in Uganda, Ana Luc\u00eda Coronel, said such massive infrastructure spending would spur a surge in aggregate demand.<\/p>\n
“So there’s a need to sequence project execution over a period of time to make sure that the economy can absorb the investments,” she said.<\/p>\n
“If the investments are too large for the size of the economy, there could be … inflation or a crowding out of private sector activity.”<\/p>\n
Some analysts and legislators have asked whether Uganda, with an estimated $21 billion GDP and total external debt of $6.5 billion as of March 2014, could afford taking on all the debt needed to finance these large-scale investments.<\/p>\n
“How much borrowing is going to be needed?” Coronel asked. “That is a key consideration that needs to be taken into account very seriously.<\/p>\n
Debt at the moment … should be kept at low risk of distress.”<\/p>\n
Ambitious Projects<\/p>\n
In the second half of last year Uganda handed out contracts worth a combined $2.1 billion to Chinese companies to develop two hydro powers on River Nile expected to generate 788 megawatts between them.<\/p>\n
China’s Exim bank is financing both projects via concessional loans although the Uganda government is also expected to provide part of the funds through direct budget allocation.<\/p>\n
President Yoweri Museveni has said Uganda is negotiating with China for a loan to fund an $8 billion standard gauge railway.<\/p>\n
The line is planned to stretch from its border with Kenya to the capital Kampala, with an arm running north to the border with South Sudan.<\/p>\n
Uganda expects to start pumping crude oil from its Albertine rift basin in 2018. To process that crude, the government is planning to develop a refinery, projected to cost $2.5 billion.<\/p>\n
The government needed to conduct a careful review, Coronel said, to determine “whether these projects are economically and financially viable.”<\/p>\n
The railway project, to be built by China Harbour Engineering Corporation (CHEC), has been particularly criticised by legislators who say its cost is hugely inflated.<\/p>\n
This week parliament resolved to set up a special committee to probe irregularities surrounding the project including how the contractor was procured.<\/p>\n
Reuters<\/p>\n","protected":false},"excerpt":{"rendered":"
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