Uganda’s economy has shown strong growth, with real gross domestic product (GDP) rising from 6.1% to 6.8% between July 2024 and March 2025, according to the World Bank’s latest Uganda Economic Update. The report attributes this performance mainly to improvements in commodity-producing sectors and manufacturing, especially pharmaceuticals and construction-related activities. However, the services sector experienced a slowdown during the same period.
On the demand side, household consumption was a major driver of growth, followed by government spending. Inflation remained below the central bank’s target of 5%, helped by stable food supplies, steady global commodity prices, exchange rate stability, and careful monetary policy management.
The Uganda Economic Update is released twice a year and provides analysis of Uganda’s short-term macroeconomic outlook. The report forecasts that economic growth could accelerate to 10.4% in fiscal year 2026/2027 as oil production begins, before settling around 6%. Oil production is expected to improve Uganda’s external and fiscal sectors in a lasting way. However, there are uncertainties about when oil production will start due to pending infrastructure projects needed for market access and revenue generation. The report also notes that the global shift toward clean energy could lower oil prices and raise the risk of stranded assets for Uganda.
Other risks identified include possible declines in global oil prices from weaker demand or increased supply, disruptions in supply chains due to conflict in the Middle East, international economic policy uncertainty, climate shocks, and delays in implementing tax reforms.
The World Bank notes that Uganda needs significant investment in human capital—education, health care, and social protection—to benefit from its young population and reach its goal of becoming a high-income country as outlined in Vision 2040 and the Ten-fold Growth Strategy. Currently, Uganda’s tax-to-GDP ratio is about 14%, which is lower than both peer countries and the government’s own target range of 16%–18%. The report stresses that increasing domestic revenue collection and improving spending efficiency are necessary for achieving development goals.
To address these challenges, the World Bank recommends several measures:
For domestic revenue mobilization:
- Review personal income tax rates and brackets to account for inflation; specifically increase the exemption threshold from UGX2.82 million to UGX4.02 million per year while keeping existing rates for most taxpayers.
- Introduce a new 35% tax band for individuals earning between UGX5.82 million and UGX120 million annually.
- Strengthen taxation of high-net-worth individuals.
- Re-evaluate corporate income tax exemptions.
- Rethink investment incentive policies.
- Improve targeting of incentives.
- Address private sector concerns within tax policy-making processes.
According to the report: “This will strengthen revenue by nearly UGX149 billion (or 0.1% of GDP) and improve equity whereby low-income earners remain unaffected, while higher-income earners face a modest increase.”
For spending efficiency:
- Adjust spending priorities toward human capital development.
- Reduce wasteful expenditure including cuts to public administration budgets.
- Tackle inefficiencies such as staff absenteeism in education and health sectors.
- Deepen reforms in public investment management for better project execution.
- Consider placing restrictions on creating new administrative structures like districts.
- Review grant allocation methods based on populations served rather than administrative units.
- Reform local government revenue frameworks so they match those of similar countries.
The report concludes that balanced adjustments between raising domestic revenues and efficient spending are essential if Uganda is to meet its development objectives.