Uganda’s economy is expected to grow 6.3 percent in the financial year starting in July, the IMF said on Thursday, the same pace predicted for this year, as delays to oil production and domestic and regional political tensions drag on prospects.

The East African country’s central bank has said the economy needs to expand by at least 7 percent a year in order to provide jobs as its young population enters the workforce.

Uganda’s next financial year runs from July 2019 to June 2020.

In its latest assessment of Uganda’s economy, the IMF said business sentiment remained strong amid favourable monetary policy conditions, and that public infrastructure investments could help push growth to 7 percent in the medium term.

“The main risks to the outlook are unfavourable weather conditions, domestic and regional political tensions, and further delays in the start of oil production,” the IMF said.

Uganda is due to hold its next presidential elections in 2021. President Yoweri Museveni, 74, is likely to face off with pop star turned lawmaker Bobi Wine, 37.

Security forces have been using teargas and water cannon to break up rallies by Wine and other Museveni opponents as authorities move to blunt their momentum ahead of the poll.

Domestic tensions have been joined by regional worries. In February, Rwanda begun blocking Ugandan goods from entering its territory while also stopping its nationals from crossing into Uganda. Kigali accuses Kampala of supporting dissidents.

Tensions between the two neighbours remain unresolved and trade has also virtually ceased.

After discovering crude more than 10 years ago in the country’s west, near the Democratic Republic of Congo, Uganda has banking on oil revenues to clear a mountain of public debt.

But production has been repeatedly delayed by a lack of infrastructure and disputes with international oil firms over development strategies. Production is now scheduled to start in 2022.

The IMF projected Uganda’s public debt would hit 50.7 percent of GDP in financial year 2021/22, up from a projected 42.2 percent in the current financial year that ends in June.

“Vulnerabilities are increasing … debt metrics have deteriorated,” the IMF said, urging authorities to reign in borrowing and keep the debt below 50 percent of GDP.

“Some investment projects may not generate the envisaged return, and interest payments are rising.”

The central Bank of Uganda has previously sounded the alarm over the surging public debt, saying it was already above 50 percent of GDP if loans signed by the authorities but not yet released by creditors were included. (Editing by Katharine Houreld and Catherine Evans)

Source: Reuters