Lower than expected rainfall in Uganda since May could lead to a drop in food production, hurting economic growth and putting upward pressure on inflation, Finance Minister Matia Kasaija said.

Uganda, which expects to start producing oil in the next four years, has an economic growth forecast of 5.5% for the fiscal year that started July 1. But Kasaija said that economic growth could rise to 6 to 7% in the 2017/18 fiscal year, driven by higher private and public investments.

For fiscal 2016/17, he said: "The weather has not been particularly good this season so agricultural production may come down and of course it will naturally affect even our growth rate."

Speaking on Tuesday, Kasaija did not revise the forecast for 2016/17 growth from the 5.5% he had delivered in his budget speech last month.

Most parts of Uganda have been experiencing the dry spell.

The minister said lower harvests could drive up food prices, stoking inflation. Farming accounts for about a fifth of Uganda's annual economic output of R8.56-billion.

Inflation, which shot up after the currency weakened steeply last year, had stabilised at around 5%, allowing the central bank to start easing rates.

"Inflation we have controlled. Interest rates we are also controlling. The exchange rate has also stabilised. In fact, recently the shilling started gaining, so we are stable," the minister said.

Kasaija said construction was expected to start in 2016/17 on a new standard gauge railway to link up with a new line in Kenya that is being built to the Kenyan port of Mombasa. It will offer a faster service than the century-old narrow gauge line.

The government has already started compensating owners of land along the rail route and had secured financing for the project from China's Exim Bank.

He rejected criticism by some analysts that the government was taking on too many loans from China at the expense of future generations.