World Bank: Uganda Can Eliminate Trade Deficit by Removing Trade Barriers
By Jepkemei Gachomo
KAMPALA--Uganda may close its trade deficit in the next five years if it removes trade barriers with its neighbour, says the World Bank,
The East African country can earn an additional $2.5 billion from non-traditional trading partners in the region which will help offset the trade imbalance estimated at $2.4 billion. This can in turn stabilize the economy in the face of a slowdown in overall growth and reduced aid flows.
“Looking beyond the East African Community, Uganda must position herself as the land bridge to link other landlocked countries to the coastal economies. Regional integration and trade is the best opportunity for a brighter economic outlook,” said World Bank Country Manager, Ahmadou Moustapha Ndiaye.
According to a report from World Bank titled “Bridges Across Borders: Unleashing Uganda’s Trade Potential,” the bank advices the country that a more rapid diversification of the economy and proper use of resources, including oil, will drive improved growth momentum.
The report also points out that Uganda should work at eliminating non-tariff trade barriers to reduce the cost of doing business, reduce transport costs in order to raise productivity and increase connectivity, and improve transport logistics to make the country a better land-linked partner.
Uganda’s Minister of Finance, Planning & Economic Development, Hon Maria Kiwanuka notes that for the country to benefit more from regional trade, there is need for efficient transport corridors to allow more efficient flow of goods to the regional markets.
“Uganda has entered into a number of regional agreements, including the East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA). These regional agreements have yielded significant dividends, almost doubling Uganda’s regional exports over five years, to 25 percent of total exports in FY11,” noted Hon. Maria Kiwanuka,
The World Bank projects a positive economic outlook for Uganda so long as the country concentrates her efforts on improving productivity in agriculture, manufacturing and service sectors. For example, the agricultural sector contributes approximately a quarter of Uganda’s total production and employs approximately three-quarters of its workforce.
“Over the medium-term, if existing uncertainties in fiscal management are resolved, Uganda’s rate of economic growth should gradually increase, reverting to and perhaps even exceeding historical averages of 7-8 percent,” says Rachel K. Sebudde, World Bank Senior Economist and lead author of the report.
“This increased rate of growth will largely be driven by reduction in binding constraints as investments in infrastructure including oil materialize and a higher level of integration between Uganda’s economy and regional and world economies,” adds Sebudde.
Uganda’s overall position in terms of its transactions with the rest of the world improved in 2012 on account of increased capital inflows. At the same time, the current account deficit worsened and the slight improvement in services did not compensate for deterioration in the trade balance of goods.