Uganda’s Economy Remains Resilient Amid Global Challenges, With Strong Growth and Declining Inflation

The 24th edition of the Uganda Economic Update highlights a significant reduction in headline inflation, which fell to an average of 3.2% in fiscal year 2023/2024, down from 8.8% the previous year.

Despite ongoing global economic challenges and geopolitical uncertainties, Uganda’s economy has demonstrated remarkable resilience. According to the latest World Bank report, the country’s real gross domestic product (GDP) expanded by 6.1% in fiscal year 2023/2024, an increase from the 5.3% growth recorded in the previous fiscal year. This sustained economic momentum has been largely driven by a robust service sector, particularly tourism, as well as strong industrial activity, including growth in manufacturing and construction.

Inflation Trends and Monetary Stability

The 24th edition of the Uganda Economic Update highlights a significant reduction in headline inflation, which fell to an average of 3.2% in fiscal year 2023/2024, down from 8.8% the previous year. This decline has kept inflation below the central bank’s target of 5%, making Uganda one of the East African nations with the lowest inflation rates. The decrease was facilitated by a combination of factors, including easing global economic shocks, falling food and energy prices, a tight monetary policy, fiscal consolidation, and a stable foreign exchange regime.

Outlook for Fiscal Year 2024/2025

Looking ahead, Uganda’s GDP is projected to grow modestly to 6.2% in the fiscal year 2024/2025. A major boost to growth could come from the scheduled commencement of oil production, which is expected to reach peak production of 230,000 barrels per day. However, any delays in oil extraction could pose a downside risk to this optimistic outlook. Meanwhile, inflation is expected to remain close to the central bank target but could face upward pressure from commodity price fluctuations, adverse weather conditions, and exchange rate depreciation. Furthermore, Uganda’s public debt is projected to rise slightly to 52% of GDP, mainly due to election-related expenditures as the country prepares for polls in early 2026.

Revenue Mobilization and Fiscal Policy Recommendations To sustain economic progress and support critical infrastructure investments in transport, energy, and social sectors, Uganda must enhance its domestic revenue generation. According to Saadia Refaqat, the World Bank Senior Economist and lead author of the report, effective tax exemption management, an improved tax system, and stronger enforcement of digital taxation policies are crucial measures for boosting revenue collection. Additionally, providing capacity-building initiatives for small businesses and establishing a taxpayer education unit at the Uganda Revenue Authority would help improve tax compliance and understanding among the public.

Investment in Human Capital and Early Childhood Development (ECD) A well-structured fiscal strategy will enable Uganda to allocate more resources to human capital development—focusing on education, healthcare, and workforce productivity. The 24th Uganda Economic Update underscores the pivotal role of public and private investment in Early Childhood Development (ECD) as a foundation for harnessing Uganda’s demographic dividend. Investing in ECD ensures that children receive proper nutrition, healthcare, and early education, fostering a generation of healthy, skilled, and innovative adults who can contribute to economic growth.

Key Priorities for Early Childhood Development Investments The economic update identifies four essential ECD investment priorities for the near term:

1. Expanding healthcare infrastructure – Increasing the number of primary health care facilities and community hospitals in underserved areas to improve access to quality healthcare.
2. Introducing publicly financed pre-primary education – Establishing one year of quality, government-funded pre-primary education in alignment with the Early Childhood Care and Education Policy.
3. Developing affordable childcare models – Implementing childcare solutions that support working mothers, especially those in the informal sector, with a focus on children under three years of age.
4. Scaling up parenting support programs – Strengthening community-based initiatives that equip parents with skills and resources to enhance their children’s development.

Conclusion The World Bank Country Manager for Uganda, Mukami Kariuki, emphasizes that strategic investments in early childhood development will ensure that Uganda’s young population becomes a valuable economic asset. By prioritizing these areas, Uganda can strengthen its workforce, boost productivity, and accelerate long-term economic growth. The World Bank remains committed to supporting Uganda’s efforts to transform its youth into drivers of sustainable development and economic prosperity.