major macro economic indicators
|2020||2021||2022 (e)||2023 (f)|
|GDP growth (%)||2.8||3.4||4.7||5.5|
|Inflation (yearly average, %)||2.7||2.2||7.2||8.4|
|Budget balance (% GDP)||-7.5||-7.8||-6.0||-4.5|
|Current account balance (% GDP)||-9.3||-7.8||-8.0||-7.0|
|Public debt (% GDP)||46.4||51.6||53.0||52.0|
(e): Estimate (f): Forecast *Grants included **Fiscal year from July 1st to June 30th. 2023 Data: FY2022/23
- Natural resources: fertile soil, oil deposits, hydroelectric potential
- Diversification efforts, particularly in the agri-food sector
- International support for infrastructure projects
- Debt mainly on concessional terms
- Second largest coffee exporter on the continent behind Ethiopia
- Endemic poverty, persistent inequalities
- Inadequate infrastructure
- Insecurity in border areas (Democratic Republic of Congo and South Sudan) and recurrent tensions with neighbouring Rwanda
- Poor progress in governance (particularly in terms of fighting corruption)
- Lack of transparency in the gold industry
Stronger growth in 2023
Uganda's growth declined in 2022 due to strong inflationary pressure. This led the central bank to increase its key interest rate exponentially between May and August 2022, from 6.5% to 9%. This increase, by weighing on credit, affects domestic private investment. By contrast, development by the French TotalEnergies and the Chinese China NATIONAL offshore Oil Corporation of their respective oil fields of Tilenga and Kingfisher near Lake Albert will continue in 2023 for production to come on stream in 2025. The economy is also expected to benefit from the reform of the Mines and Minerals Act. The abolition of the 5% tax introduced in July 2021 on exports of refined gold (the bulk of the metal exported) will, in principle be replaced by a levy of USD100 per kilo, should revive exports of the metal, which have since fallen to zero. Growth will also be based on agriculture (23% of GDP) with maize and coffee, for which global and regional demand is strong and prices high. Uganda is one of the world's top ten coffee exporters and No. 2 in Africa with 6.65 million bags produced in the 2022-2023 season. Government authorities plan to start increasing forest cover from 2.6% to 15% in order to mitigate the effects of climate change on agricultural production. Agricultural incomes will ease the impact of inflation on household consumption. Moreover, barring adverse developments in the health situation (Covid-19 and Ebola), tourism (10% of exports), particularly from the hotel industry, will also help to boost activity. The development of information and communication technologies should continue (10% of exports), such as fintech, with the growing number of mobile money transactions in the wake of Covid. Last, growth in manufacturing production (16% of GDP with agri-food, clothing and construction materials) should also materialise.
Fiscal consolidation dependent on reforms
The budget deficit is expected to narrow in 2022-2023, in line with growth. In addition, reform of the tax administration, optimisation of the tax base and an increase in customs duties will help generate revenue. On the expenditure side, under the three-year USD 1 billion Extended Credit Facility programme agreed with the IMF in June 2021, fiscal consolidation will involve a reduction of non-priority expenditure, which will help moderate growth payments the debt (23% of revenue over 2021-2022). Consequently, the increase in expenditure will be mainly due to investments in the development and modernisation of infrastructure (roads, dams, oil pipeline), and in public services such as education, security and health. The deficit will be financed largely by external debt (mainly on concessional terms), as domestic debt rose sharply to represent 38% of the stock at the end of 2021 and generate 79% of interest. Moreover, domestic borrowing crowds out private sector credit.
Despite the return of gold sales and the increase in agricultural sales, imports of capital goods, particularly those needed for oil projects, will drag on reducing the trade deficit. Energy and food imports will remain expensive. The primary income deficit will widen due to increased profit repatriation by foreign companies, but will be largely offset by the secondary income surplus of expatriate remittances and aid. The services deficit will narrow as tourism recovers. In the end, the current account deficit is expected to narrow only slightly.
Tense political landscape and social frustration
President Yoweri Museveni and his National Resistance Movement (NRM) party, which has been in power since 1986, provide stability but prevent political change. Mr Museveni's son, Muhoozi Kainerugaba, an army officer and senior presidential adviser, is being groomed to succeed him as NRM leader in 2026, heralding a showdown with other contenders within the party in search of influence. Opposition frustrations with the limited democratic space could lead to unrest. The government has refused to provide subsidies and aid, other than in the agricultural sector, to deal with inflation. This could lead to demonstrations, such as those that took place in mid-July 2022 and were violently repressed. Furthermore, the Allied Democratic Forces (ADF), an Islamist group based in the eastern provinces of the Democratic Republic of Congo (DRC), pose a security risk, including to the capital, Kampala, and its surroundings. Although the last ADF attacks were carried out at the end of 2021, the danger persists. Since the end of 2021, the Ugandan army has been involved in counter-insurgency operations in the DRC, which were extended in early September 2022. Uganda and Rwanda have undertaken to normalise their relationship. This includes the reopening of the border in early 2022 (closed since 2019) and the tentative resumption of bilateral trade. Uganda maintains cordial relations with the United States, the EU and the United Kingdom, but also with Asian states, which represent an important source of imports (particularly manufactured goods). Last, it maintains close ties with Tanzania, with which it intends to develop cross-border projects such as the East African Crude Oil Pipeline.
Last updated: April 2023