Uganda grows in spite of problems.


Uganda is in the midst of dealing with several serious problems. Both the weather and the country's political situation are unstable.

In terms of the weather, a severe drought is likely to persist well into 2007. The drought not only threatens the country's food supply, but it also creates power shortages because water levels drop degrading the performance of the country's hydroelectric power infrastructure.

Power shortages impact the cost of doing business in Kampala because of the need of businesses to acquire and operate private generators. The costs are passed on to consumers in the form of higher prices for food and other necessities.

Inflation is a major concern for consumers. The International Monetary Fund (IMF) estimates Uganda's rate of inflation increased 8 percent in 2005, 6.7 percent in 2006, and will rise 7.0 percent in 2007.

Politically, the government is involved in negotiations with rebel factions to end violence in the northern part of the country. The negotiations are difficult and, according to a recent report (January 16, 2007) circulated by the Great Lakes Centre for Strategic Studies (GLCSS), a London-based think with offices in East and Central Africa, the pace of negotiations represent a real threat to Uganda's development, and the ability of the country to attract foreign investment.

Uganda has made significant economic progress in recent years, says the GLCSS. Growth has been strong. The IMF shows Ugandan GDP growing 5.7 percent in 2004, 6.0 percent in 2005, 5.5 percent in 2006, and estimates the economy will grow 6.0 percent in 2007.

On January 25, 2006, the newspaper New Vision (Kampala) also estimated 2007 growth at 6.0 percent. Citing government sources, the New Vision story said that due to the country's development of thermal power generation, energy demand will have a greater chance of being met. The increased availability of electric energy will reduce generation costs to business, which will have the ability to pass on cost reductions to the country's hard pressed consumers. Typically, however, such price reductions lag as business attempts to...

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