Uganda’s Economy Has Taken Off Says Kasaija

The Finance and Economic Development Minister, Matia Kasaija says the country’s economy has taken off.

He suggests the country’s economy has gone through a period of significant and sustained economic growth, often characterized by increased productivity, investment, and living standards.

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“Price stability, currency stability, jobs, exports, FDI receipts stability are in good shape and are highly competitive regionally and globally” he stated.     

Over the next 15 years, Uganda's economy is projected to expand tenfold, growing from US$ 50 billion to US$ 500 billion.

This ambitious growth trajectory will be driven by strategic efforts focused on sustainable development and comprehensive socio-economic transformation.

  An economy is considered to be "taking off" when it exhibits sustained growth in per capita income, indicating a shift from a traditional to a more developed economic stage. 

According to the World Bank, growth in Uganda is projected to increase modestly to 6.2% in FY25, driven by agriculture and services.

Over the medium term, the start of oil production is expected to significantly boost growth, accelerating to 10.4% in FY27 before returning to around 6% as oil production plateaus.

Matia Kasaija stated that Uganda's economy will grow at least 7% in the fiscal year starting in July. The World Bank said in March this year that Uganda’s economy has shown resilience despite recent global economic pressures.

“Growth was supported by higher net exports, mainly of coffee and gold, increased oil sector investment, and reduced global supply chain disruptions. Additionally, government initiatives such as the Parish Development Model (PDM) provided further economic momentum”

Growth is projected to increase modestly to 6.2% in FY25, driven by agriculture and services.   Over the medium term, the start of oil production is expected to significantly boost growth, accelerating to 10.4% in FY27 before returning to around 6% as the oil production plateaus.     

The developments in the oil and gas sector that are expected to drive growth in the medium term, are anticipated to have positive spillover effects across other sectors of the economy, leading to improvements in public infrastructure, increased private sector activity, and strong net flows of Foreign Direct Investment.

Poverty is expected to decline slightly in FY25, with a faster reduction anticipated as economic growth accelerates over the medium term. The strategic investment of oil revenues in social services, infrastructure, and human capital could further lower poverty rates to 38% by 2027.

Meanwhile, Kasaija said because of the sustained growth of the economy, Uganda also graduated from the Least Developed Countries (LDC) group of countries. 

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“Poverty and inequality have reduced significantly. Our deliberate onslaught on subsistence economy has resulted in reducing on the number of Ugandans working for only the stomach to just three in every ten homesteads” said Kasaija.    

The UN’s Committee for Development Policy (CDP) in March 2024 formally acknowledged that Uganda has met the criteria for LDC graduation, but the actual graduation will likely be delayed until at least by 2030.  

The Committee for Development Policy (CDP) will assess Uganda again in 2027. If it meets the criteria again, Uganda could be recommended for graduation. Graduation would be effective after endorsement of the recommendation by the United Nations Economic and Social Council (ECOSOC) and the General Assembly and a preparatory period.

President Museveni, who by the constitution is the Finance agreed with his minister about the economic fundamentals that have enabled the take off.

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The challenge is whether Uganda can weather through the global storm caused by President Donald trump’s trade barriers.

A World Bankreport released early in the warned thatglobal economic growth could slow to its weakest level since the 1960s. It cited an environment of trade obstacles and tariff policy uncertainty as the possible underlying reason for sluggish growth.

The World Bank’s Global Economic Prospects report painted a bleak picture of the world economy over the first seven years of the 2020s.

It predicted 70% of the world’s economies would see lower-than-expected growth and that overall global growth would top out at 2.3% in 2025.

“The sharp increase in tariffs and the ensuing uncertainty are contributing to a broad-based growth slowdown and deteriorating prospects in most of the world’s economies,” it said. In a related development, the World Bank had noted some challenges for Uganda as it strives through the coming years.  

  It noted what it described as the persistent deficit in human capital and the lack of a significant productive jobs agenda as one of the challenges owing to a growing working-age population, remain key challenges.

“The services sector, despite constituting a large share of the economy, remains relatively low job-intensive compared to the agricultural sector, which employs two-thirds of the workforce. The agricultural sector, however, remains marked by low productivity and limited modernization, and is prone to climate shocks. Yet climate adaptation efforts are still inadequate” the World Bank stated.

It said to promote economic growth and reduce poverty over the medium term, Uganda must focus on structural transformation, shifting labor into more productive employment and increasing productivity in the agricultural sector, where the poor are concentrated.

“Reforms should stimulate private sector investment by lowering the cost of doing business, expanding access to finance, and promoting the uptake of digital and innovative technologies. 

Furthermore, the government must re-balance fiscal consolidation efforts by shifting spending into social sectors, which have been underfunded relative to infrastructure.” reads part of the report.

It suggested that Uganda needs to maintain prudent macroeconomic management and adhere to the fiscal rules embedded in the country’s Charter for Fiscal Responsibility, enhance revenue mobilization, and strengthen the non-oil economy once oil revenues start to flow.

Uganda’s Outlook and risks from World Bank’s perspective The economy is projected to expand by 6.0% in 2024 and 7.0% in 2025, buoyed by stronger regional growth as global supply chains normalize.

The oil sector will continue ramping up investments in wells and pipelines, further underpinning growth and future exports. Rising imports of goods and services will keep the current account deficit elevated. Inflation is expected to converge to 5% as the Bank of Uganda maintains its tight monetary policy. The fiscal position is expected to further improve with continuing consolidation efforts. 

Nonetheless, external risks are tilted toward the downside. Supply chain disruptions around the Red Sea could slow trade as risk premiums rise, while intensifying regional insecurity could delay investments. 

Domestic risks are related to unexpected increases in public spending on infrastructure amid weak tax revenue performance. 

The International Monetary Fund’s extended Credit Facility will bolster reserves and set performance targets to guide the authorities.

Reform of the global financial architecture 

Despite a shift from agriculture to services, Uganda’s structural transformation remains incomplete. Agriculture’s contribution to GDP has declined from 53% in 1990 to 24% in 2022, yet 7 of 10 Ugandans are still subsistence farmers and working in low-value-added agricultural jobs, with agricultural labor productivity rising by just 26%. 

While productivity has advanced 294% in manufacturing and 164% in trade services, these sectors employ a small fraction of the workforce. Manufactured exports constituted only 13% of total exports in 2022. Accelerating structural transformation requires boosting agricultural productivity and investing in firms and jobs in industrial sectors and services. 

Also critical is scaling up skilling, promoting innovation through research, and boosting mechanization of agriculture.