News that the 64-year-old former rebel will stand again has found favour with investors hungry for opportunities in emerging markets, but confounded opponents who have criticised his increasingly autocratic leadership style.

"Inflation is under control, the budgetary deficit is moderate, the exchange rate looks favourable," Christopher Hartland-Peel, head of Africa Equities research at emerging markets broker Exotix, told Reuters. "As he's done a good job ... in aggregate, there's no reason why he shouldn't stay."

Following a flurry of rumours and leaks, the country's vice-president confirmed on Friday that Museveni would be the ruling party's candidate in the next polls.

Landlocked Uganda lies at a crossroads of trade routes from the mineral-rich forests of eastern Congo to oil-producing southern Sudan and Kenya's Indian Ocean coast.

Recent oil discoveries around Lake Albert, which Uganda shares with the Democratic Republic of Congo, have also turned the area into an important new frontier in the hunt for crude.

Two decades of relative stability since Museveni led forces that overthrew the late dictators Idi Amin and Milton Obote has seen Uganda's economy grow at an average of 6 percent, with a forecast of 8.1 percent for 2008/09.

The former cattle herder turned student activist and rebel has been credited with creating a big rise in living standards for most Ugandans, though the country remains desperately poor.

"Who would he hand the reins to between now and 2011? There isn't anybody," said one senior Western diplomat in Kampala.

STRONG GROWTH

Addressing African leaders at a summit last month, Museveni delivered a typically robust defence of his 22 years in power.

Poverty levels in Uganda had been cut to 31 percent in 2005/06 from 56 percent in 1992/93, he said, mostly thanks to business-friendly reforms that were unpopular at the time but attracted foreign and local investment.

Despite a political crisis in neighbouring Kenya, high fuel and food prices and energy shortages he blamed on "wrong advice" from the World Bank, the economy had still grown nearly 9 percent in the last financial year 2007/08.

He dismissed calls for presidential term limits as a "golden calf" erected by "meddlers" to divert leaders from their goals.

Museveni has made no direct comment on his plans after his current five years in office. The opposition accuses him of turning into just the kind of power hungry "Big Man" African leader he lambasted as a fresh-faced former rebel in the 1980s.

Criticism of Museveni peaked in late 2005 after parliament scrapped term limits that would have stopped him from running again the following year, and his main challenger was charged with rape, treason and terrorism in the run-up to the ballot.

The arrest on Friday of three officials from central Uganda's traditional Buganda kingdom on charges of promoting war, sectarianism and terrorism revived some of those memories.

"SADLY PREDICTABLE"

Museveni's challenger at the February 2006 election was Kizza Besigye, who was once a close ally and his personal doctor during the bush war. Besigye won 37 percent of the vote and then challenged the result in court, unsuccessfully.

But since then, his opposition Forum for Democratic Change (FDC) has become increasingly divided, making few inroads against Museveni's ruling National Resistance Movement (NRM).

It is unclear whether Besigye will be its candidate in 2011, or if the FDC will test a fresh face against an incumbent who will be expecting to win by a broad margin again.

Museveni -- who sports a floppy bush hat and has a gruff, man of the people persona at rallies -- remains popular with many older voters who remember the darkest days under Idi Amin.

Some say they support him more after watching political and tribal violence erupt across the border in Kenya earlier this year, fearing the same could happen in Uganda.

But the prospect of another Museveni term has caused new cracks in the NRM, which ran Uganda as a one-party state until a referendum that brought back multi-party politics in 2005.

Some senior figures now openly criticise his leadership although there are doubts over the credibility of any potential successors from his party.

The main anti-Museveni agitation is being led by two former health ministers charged with stealing nearly $2 million in donor funds earmarked for children's vaccines.

Some Ugandans believe the president is grooming his son Muhoozi, a media-shy army major trained at Britain's Sandhurst, to fill his shoes. Museveni denies it. Muhoozi, 34, qualified last week in the United States as Uganda's first paratrooper.

Uganda has never had a peaceful handover of power in more than four decades since independence from Britain.

Analysts say Museveni has contributed to that by actively sidelining all would-be successors.

"It's a big problem and all a bit sadly predictable," said Tom Cargill of London's Chatham House think tank.

"The leader comes along saying this is a fundamental change, Africa's problem is leaders who want to stay in power for too long. Then surprise, surprise, after a decade in power he finds that it gets harder and harder to leave."