Uganda budget to boost infrastructure, focus on deficit

By Barry Malone

KAMPALA (Reuters) - Uganda will try to balance competing pressures to bring its deficit and inflation under control while making a push to take advantage of an oil find and develop infrastructure in its 2011/12 budget.

Re-elected President Yoweri Museveni is promising to deliver on what analysts say, despite the newly-discovered oil, is an unrealistic goal to make Uganda a middle income country by 2015.

To do this, the government will invest heavily in roads, hydropower dams and an oil refinery, but Africa's second biggest coffee producer will do well not to spoil its international reputation as a stable fiscal operator.

"Election spending and a deal to buy Russian fighter jets, as well as a fall in aid due to corruption concerns, led to a large deficit in 2010/11," Joseph Lake of the London-based Economist Intelligence Unit told Reuters.

"The government has signalled its intent to triple spending on energy projects in the coming budget but it needs to improve domestic revenue collection if this is not to come at the expense of higher debt."

The International Monetary Fund has said the east African nation needs to broaden its tax base by eliminating exemptions as its revenues, at about 12.5 percent of gross domestic product, are low and insufficient for infrastructure investment.

Uganda expects its economy to grow 6.6 percent in the 2011/12 fiscal year (July-June), up from 6.4 percent growth in 2010/2011, according to budget documents seen by Reuters.

For almost two months since April Museveni faced protests against soaring food and fuel prices. Though the protests now appear to have fizzled, the opposition says it is planning more and the president of 25 years will be keen to harness inflation.