By Karin Strohecker
LONDON (Reuters) – Uganda’s economy will grow 7 percent a year in the three to five years time, up from a forecast 6 percent in 2014, helped by investment from oil explorers and by expansion in the services sector, the finance minister said on Tuesday.
Uganda found oil in 2006 and expects output to start around 2017.
“We are looking at 7 percent in the medium term, and for us medium term is the next three to five years,” Finance Minister Maria Kiwanuka told Reuters inLondon, where she was attending a conference.
She said the economy was expected to growth 6 percent in the 2014 calendar year, a figure in line with the International Monetary Fund’s forecast of 6.1 percent growth for fiscal 2014/15, which began on July 1.
“We are looking to a big increase in investment demand ,as oil companies are bringing in more of the equipment that they are going to need to start extracting the oil,” Kiwanuka said. “We are looking to continue the increase in services demand – manufacturing, financing and telecoms.”
Once oil starts flowing, it will make a big contribution to state revenues but will not dominate other productive sectors, she said. “The oil revenue should be maybe a sixth to a fifth of our economy.”
A recent fall in oil prices does not set back plans for production, in part because Uganda should be able to command a good price for products it refines locally while imported competition has to travel along long, expensive overland routes, she said.
“We are inland, we are 1,000 miles in from the sea, so there is an inbuilt buffer against international oil prices,” she said, after oil prices tumbled from more than $110 in June to below $90 now.
Uganda has agreed with oil firms on building a refinery with initial capacity to process 30,000 barrels per day (bpd) of crude. It has also agreed to build an oil pipeline through Kenya, which has also found oil.
“Our oil is very well suited for heavy uses like ship oil, bunker oil and so on,” the minister said. “So that component that goes to the export market will always be in demand to fuel those ships that carry the world’s trade on the oceans.”
