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INTERVIEW-Ugandan minister says anti-gay law has little investment impact

Source: Reuters - Tue, 6 May 2014 17:35 GMT
Author: Reuters
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* Anti-gay law having little impact on ties with West

* Conflict in South Sudan hurting exports

* Uganda does not rule out Eurobond

* Fund planned for extra oil earnings

By Carolyn Cohn

LONDON, May 6 (Reuters) - Uganda's anti-gay law is having little impact on its ability to attract investment from Western economies and investors, its finance minister said on Tuesday.

Western donors have halted or re-directed about $118 million in aid to the east African economy since President Yoweri Museveni signed a law in February which toughened existing rules against gays and prescribed life in jail for what it called "aggravated homosexuality", such as sex with a minor.

"There has been a lot of heat and dramatisation," Maria Kiwanuka told Reuters on the sidelines of a Uganda business forum, saying she had no figures for any aid cuts.

"Nobody has written to me to say," she said.

Aid contributed around 20 percent of the budget this year, Kiwanuka said, compared with 25 percent in the 2012/2013 year. Analysts have said Uganda has become less dependent on aid for budget support in recent years.

Kiwanuka denied the law had affected Uganda's economic relations with the West, saying she had held recent extensive discussions with U.S. officials on the sidelines of the World Bank/IMF meetings in Washington in April.

"No one has said 'I am not talking to you any more'."

Foreign direct investment into Uganda, which is due to start producing oil in the next few years, rose to $1.5 billion in the 2012/13 year, Kiwanuka said, double the levels in 2008/09 at the height of the global financial crisis.

"We are getting inward investments into the oil (sector), so it could be higher this year," said deputy central bank governor Louis Kasekende, who was also present at the interview.

Richard Branson, the billionaire founder of the Virgin Group conglomerate, told Reuters last month the anti-gay legislation was "very sad and damaging to the country's reputation and prospects".

But Kiwanuka said, "Virgin Atlantic is still flying into Lagos, and Nigeria has even stricter laws."

Uganda is one of 37 countries in Africa where homosexuality is illegal. Foreign investors are prominent in many countries where homosexuality is illegal or seen as anti-gay, such as Nigeria and Russia. (For GRAPHIC on same-sex laws around the world, see http://link.reuters.com/tuh27v).

EUROBOND QUESTION

Uganda's central bank said last week growth for the 2013/2014 fiscal year ending June would be 5.7 percent, a slight drop from earlier 6 percent forecasts, with 6-6.5 percent growth seen next year.

This was largely due to a slowdown in exports to conflict-hit South Sudan.

"It's a big trade partner," Kiwanuka said, adding exports to east Africa fell 15 percent in the January-March quarter, with South Sudan the major contributor to the downturn.

Uganda aims to borrow commercially from whichever sources are cheapest to help fund economic development, Kiwanuka said.

"Like any good housewife, I will go for the least cost, who will give me the best value."

Uganda previously shelved plans for a debut Eurobond, rather than follow several other African sovereigns which have issued dollar debt in the past few years - some more than once.

But Kiwanuka did not rule out a Eurobond - even though yields have risen in emerging debt markets over the past year - if debt underwriters were able to provide attractive pricing.

"Who knows - a Eurobond merchant might be very skilful," she said.

Once oil output starts, Uganda plans to follow other African states such as Nigeria and Angola in setting up a form of sovereign wealth fund to preserve excess oil revenues for future generations.

The fund would only invest in triple-A rated assets, Kiwanuka said. (Reporting by Carolyn Cohn; Editing by Ruth Pitchford)

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