Bloomberg News

Uganda Cuts GDP Growth Forecast as Drought Hits Cash Crops

June 07, 2011

(Updates with comment from ministry in third paragraph.)

June 7 (Bloomberg) -- Uganda’s Finance Ministry cut its growth forecast for the 2010-11 fiscal year to 6.3 percent following a slump in the production of cash crops because of poor rains.

The government has previously forecast growth of 6.4 percent for the 12 months through June, the Finance Ministry said in a budget document handed to reporters in the capital, Kampala, today. The country’s budget for 2011-12 will be released tomorrow.

“The cash crops sub sector which includes coffee, cotton, sugar cane and exported horticulture experienced a huge decline of 15.8 percent in 2010-11,” the ministry said.

The government is targeting growth of 7 percent in the medium term as the start-up of oil production helps finance investment in energy, roads and rail links, the ministry said. U.K.-based Tullow Oil Plc expects to start pumping crude and gas from the Lake Albert Basin next year. The country has an estimated 2.5 billion barrels of oil, with about 1 billion barrels in proven reserves, according to Tullow.

Economic growth accelerated from a revised 5.5 percent growth in 2009-10 led by services and industry, the ministry said. Growth in the previous fiscal year was initially estimated at 5.8 percent. Services and industry may grow 8 percent and 7.5 percent respectively this year, the ministry forecast.

Tax Collection

Tax collection in the current fiscal year is estimated at 5.02 trillion shillings ($2.1 billion), or 99.8 percent of the initial target, the ministry said. The budget deficit may widen to 4.8 percent of gross domestic product from 4.7 percent the year earlier, it forecast.

The East African nation’s current account deficit widened to $2.29 billion in the 12 months through March, from $1.47 billion a year earlier, the ministry said.

Uganda is Africa’s second-biggest producer of coffee, after Ethiopia. Robusta accounts for about 85 percent of the country’s annual coffee output.

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--Editors: Philip Sanders, Alastair Reed

To contact the reporter on this story: Fred Ojambo in Kampala at

To contact the editor responsible for this story: Paul Richardson at

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