By the Blouin News Business staff

Uganda’s economy thrives despite anti-gay controversy

by in Africa.

President Museveni (L) walks with the Speaker of Parliament Rebecca Kadaga (R) in February 2012. AFP/Getty Images

President Museveni (L) walks with the Speaker of Parliament Rebecca Kadaga (R) in February 2012. AFP/Getty Images

Uganda’s harsh anti-gay legislative law has been a matter of discussion in the region and around the world — though its economic accomplishments are being talked about as much if not more. Little does it matter that Western donors have halted or re-directed about $118 million in aid to the east-African country since President Yoweri Museveni signed the law in February. The International Monetary Fund just said that its economic growth, mainly supported by public investment, should accelerate to 6.1% for the 2014/15 fiscal year, through June 2015. This number is up from an expected 5.7% growth this fiscal year.

Uganda’s finance minister Maria Kiwanuka recently said that the anti-gay law is having little impact on its ability to attract investment from Western investors, alleging that she didn’t have any figures for any aid cuts (something hard to believe given her key governmental position). “There has been a lot of heat and dramatization,” Kiwanuka told Reuters last week and added that “no one has said ‘I am not talking to you any more'” — perhaps a call for the international financial community to raise its voice though foreign investors are prominent in countries with such laws.

In a review paper focused on Uganda, the IMF said that “despite a slowdown in agriculture and unrest in South Sudan, growth continues to be robust.” However the multilateral organization did raise some red flags: “There is also a need to pay increased attention to revenue mobilization. Following the recent large shortfall in tax revenue and the risk of reductions in foreign aid, broadening the tax base and improving efficiency in tax administration are more critical than ever.” Its ability to increase tax revenue collections is the biggest challenge the Ugandan economy faces. The IMF suggests that President Yoweri Museveni’s government should review existing tax laws and eliminate tax exemptions as well as “strongly enforcing compliance by all taxpayers” in order to bring it closer to regional standards”

For now the country has its ideas clear even if the IMF recommended that Uganda needed to curtail its public spending to relieve pressure on credit markets and spur lending to the private sector: they will increase domestic spending by at least 9% in the new fiscal year which will commence in a month. Government spending will focus on road-building and energy projects and are expected to increase to 14.3 trillion Ugandan shillings (US$5.7 billion) from 13.1 trillion shillings last fiscal year.

The Ugandan government is even more upbeat on the country’s economic outlook. A recent budget paper said that economic growth would accelerate to an estimated 6.8% in the new fiscal year. This is even higher than the figure given out by the central bank, at 6.5%. If South Sudan, Uganda’s largest export market, sees its ongoing civil war ease, Uganda might even be looking at higher growth numbers. Yet international investors are going to play a bigger role than the Museveni government wants to admit.