Kenya to benefit from rebound of Ugandan economy

Kenya’s single largest export market, Uganda, is seeing its economy rebound faster than expected thanks to the ability to sell food to its neighbours and contain consumer prices.

According to a report just released by the International Monetary Fund (IMF) growth is expected to rebound to GDP growth of seven per cent from mid next year after holding at 6.3 per cent between June this year and June next year.

Headline inflation is at an average of 13.3 per cent.

Kenya’s exports to Uganda, have grown steadily over the years, reaching a peak of Sh42 billion in 2008 up from Sh17.7 billion 13 years ago.

This growth underscores its importance to local businesses.

The increase in imports from Kenya has been driven by steady growth of the Ugandan economy over the past 15 years.

For example, the Ugandan economy expanded at a bullish 8.6 per cent in 2007 and, as a result, Kenyan exports to her western neighbour jumped by over Sh6 billion to stand at Sh33.6 billion.

Key among Kenya’s exports to Uganda are oil products and manufactured goods.

Kenya primarily re-exports processed petroleum products and is expected to continue to do so until Uganda builds its own refinery.

Kenya is expected to register no more than a 2.5 per cent growth in GDP this year, with the possibility of growing to 4 per cent in 2010 depending on how the global crisis continues to impact the country.

Domestic inflation currently stands at 6.6 per cent.

Strong regional markets as well as rising international prices of coffee and tea are expected to help Kenya recover from the slowdown of 2008 and 2009.

Ms Martine Guerguil, IMF mission chief for Uganda said in a statement that: “The Ugandan economy is weathering the impact of the global financial crisis better than expected.”

A mission from the African department of the IMF visited Uganda between October 14th and 27th to conduct the sixth review under Uganda’s three-year economic programme supported by the IMF’s Policy Support Instrument (PSI).

PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support.