Oil dispute holding back Uganda, says Fitch

Oct 20, 2010

Uganda has been given a B rating with a positive outlook by Fitch, a slight fall compared to the B+ outlook issued to the country last year.

Growth has been held back by a tax dispute between the government and Heritage Oil, which has limited the commercial benefits of the two billion barrels of oil that have been discovered in the nation. Associate Director in the Sovereigns Group of the credit rating agency Purvi Harlalka said the issue between the administration and the exploration company needs to be solved.

"Failure to decisively settle these issues would push the production timeline back further and dampen the positive momentum," she commented. Fitch noted it opted for a B rating as this best represents the country's balance of "robust" growth performance and history of good macroeconomic management, as well as its unfavourable business climate and low per capita incomes.

Uganda is one country that is set to benefit from an agreement between the Diamond Trust Bank Group and the International Finance Corporation, under which around two billion Kenyan shillings (€17.8 million) has been allocated to help small and medium-sized enterprises.