Country Report Uganda September 2009

Outlook for 2009-10

• The president, Yoweri Museveni, will try to reassert his control over the ruling National Resistance Movement (NRM) as ambitious politicians bid to succeed him. In-fighting will intensify as the 2011 presidential election draws closer.
• Regional disputes, particularly in Buganda, and famine conditions in the north and east of the country will provide a focus for opposition parties. But to pose a serious threat they need to form a coalition, which is unlikely.
• The Economist Intelligence Unit expects interest rates to remain low in 2009-10 in response to the slowing economy. The central bank will focus on improvements to regulations to tighten liquidity and improve credit access.
• Weak global demand will hurt Uganda's open economy and hamper trade growth. Real GDP growth is forecast to fall to 4% in 2009, rising to 5% in 2010.
• Food prices will remain high, driven by strong regional demand, a poor harvest and a loose monetary policy. We forecast an inflation rate of 12.6% in 2009, falling to 9.5% in 2010 as better weather conditions lower food prices.
• The value of coffee exports is expected to fall, as reduced production following dry weather conditions will be exacerbated by a drop in prices as global production picks up in 2009-10.

Monthly review

• Relations between the government and Buganda have deteriorated after the king called for a federal system. The wrangling is growing in significance, as Buganda is a valuable voting block and elections are only 18 months away.
• Representatives of Bunyoro have called for the return of land expropriated under colonial rule and the reservation of political positions for ethnic Banyoro as the potential for oil revenue in the region raises local tensions.
• The central bank is considering a rise in minimum capital levels for banks. The current USh4bn minimum is low, and currency depreciation has reduced it in real terms. A big increase could soak up liquidity and lower inflation.
• Stung by criticism of its response to the famine conditions in north-east Uganda, the government has discussed a food security ordinance and launched a new agricultural development strategy for 2009-15.
• The minister of state for agriculture has blamed poor rains for famine conditions rather than higher exports to neighbouring countries. The food shortage has kept prices rising, and inflation picked up to 12.4% in August.
• The first coffee-processing factory in Uganda was opened by Good African Coffee in July. It will roast and package coffee and has contracts with UK supermarkets Tesco, Sainsbury's and Waitrose, and Shoprite in South Africa.

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11