Economic activity in Uganda has shown resilience despite global challenges, with a World Bank report indicating a 6.1% growth in real GDP for the fiscal year 2023/2024, following a 5.3% increase the previous year. This growth is attributed to contributions from the service sector, particularly tourism, and the industrial sector, including manufacturing and construction.
The latest Uganda Economic Update reveals that headline inflation has significantly decreased to an average of 3.2% in fiscal year 2023/2024 from 8.8% in the prior year, staying below the central bank's target of 5%. The reduction is linked to diminishing impacts of global economic shocks, lower food and energy prices globally, tight monetary policy, fiscal consolidation, and a stable foreign exchange rate regime.
Looking ahead, GDP is expected to grow modestly by 6.2% in fiscal year 2024/2025. A significant boost could occur if oil production begins as scheduled and reaches its peak of 230,000 barrels per day. However, potential delays in oil production pose risks to this forecast. Inflation is projected to remain near the central bank target but remains susceptible to commodity price fluctuations, weather conditions, and exchange rate depreciation. Public debt is anticipated to rise slightly to 52% of GDP due to election-related spending as elections approach in early 2026.
"Therefore, increasing efforts to raise more revenue domestically remains important because it will enhance Uganda’s ability to spend on priority infrastructure such as transport and energy as well on social sectors," stated Saadia Refaqat, World Bank Senior Economist and lead author of the Uganda Economic Update.
Refaqat suggests managing tax exemptions effectively and improving tax system efficiency; providing capacity-building initiatives for small businesses; establishing a taxpayer education unit at Uganda Revenue Authority; and enforcing digital companies' compliance with VAT requirements.
Increased financial resources and prudent expenditure would enable greater investment in human capital — encompassing knowledge, skills, and physical health — crucial for productivity across areas like Early Childhood Development (ECD). The update emphasizes public and private investment's role in ECD for harnessing Uganda’s demographic dividend through its young population.
"By investing in early childhood development," said Mukami Kariuki, World Bank Country Manager for Uganda, "a nation can ensure that children receive the essential nutrition, healthcare, and education required to become healthy, skilled, and productive adults."
The economic update outlines four key ECD investment priorities: expanding primary healthcare facilities; introducing publicly financed pre-primary education; developing affordable childcare models prioritizing women in the informal sector; and scaling up promising parenting support programs.