Uganda’s Economy Grows 6.3% as World Bank Urges Agro-Industrial Transformation

The findings are contained in the 26th edition of the Uganda Economic Update, which reports broad-based expansion across agriculture, industry, and services.

Uganda’s economy continues to show strong momentum, with real gross domestic product (GDP) growth rising to 6.3 percent in FY2024/2025, up from 6.1 percent in the previous financial year, according to a new World Bank report released today. The performance was driven by a recovery in household consumption, accelerated government spending, and sustained growth in both public and private investment.

The findings are contained in the 26th edition of the Uganda Economic Update, which reports broad-based expansion across agriculture, industry, and services. As a result of this growth, poverty levels are projected to have declined during FY2024/2025, reflecting improved economic conditions and increased income opportunities.

Inflation Contained, Fiscal Pressures Rise

The report notes that tight monetary policy played a critical role in keeping inflation low, with headline inflation averaging 3.5 percent, well below the Bank of Uganda’s medium-term target of 5 percent. Stable commodity prices and prudent monetary management helped anchor inflation expectations.

However, the report also flags rising fiscal pressures, including a widening fiscal deficit and increasing public debt and debt-servicing costs. These trends underscore the importance of returning to fiscal consolidation, as outlined in Uganda’s FY2025/2026 national budget, particularly after a period of elevated election-related spending.

Medium-Term Outlook Remains Positive

Looking ahead, the World Bank projects a positive medium-term outlook for Uganda’s economy. Growth is expected to be supported by moderating government expenditure following the general elections, continued strength in exports, sustained inflows of foreign direct investment, and the anticipated start of oil revenues in 2027.

Inflation is projected to remain subdued, supported by disciplined monetary policy and relatively stable global commodity prices. In line with these projections, poverty levels are expected to decline further in 2026 and 2027.

Nevertheless, the outlook is subject to several risks, including potential fiscal slippages, delays in oil sector development, further reductions in overseas development assistance, and heightened global uncertainty that could affect commodity prices and financial conditions. Climate-related risks are also significant, as lower-than-expected rainfall could worsen poverty levels, given that many of Uganda’s poor rely on rain-fed agriculture.

Need for Structural Transformation

Despite strong growth, the World Bank cautions that economic activity remains concentrated in low-productivity and climate-vulnerable agriculture, as well as informal employment, which offer limited prospects for income growth and upward mobility.

“Uganda’s growth remains strong, however economic activity is currently concentrated in low-productivity and climate-vulnerable agriculture and informal jobs,” said Francisca Ayodeji Akala, World Bank Country Manager for Uganda. “Transformation of the economy to higher value-added activities is needed to deliver on the country’s Ten-Fold Growth Strategy. Agro-industrialization can be a key cornerstone of this transformation.”

Focus on Agro-Industrialization

This edition of the Uganda Economic Update places special emphasis on agro-industrialization, highlighting its potential to drive job creation, value addition, and inclusive growth. The report aligns Uganda’s ambitions with the World Bank’s AgriConnect initiative, which seeks to integrate smallholder farmers into agribusiness value chains.

“The building blocks to pursue the agro-industrial agenda in Uganda are consistent with the World Bank’s AgriConnect initiative,” said Armine Juergenliemk, Senior Agricultural Economist and co-author of the report. “This initiative opens opportunities for productive public–private partnerships that can accelerate technology adoption, de-risk value chains, and create more jobs in agriculture and rural areas.”

Key Recommendations

The report outlines three major policy priorities to support Uganda’s agro-industrialization agenda:

Strengthening foundations and infrastructure, including climate-smart agricultural technologies, irrigation investments, co-located rural infrastructure such as roads, energy and water, skills development, and digital platforms for agricultural services.

Improving the policy and enabling environment by reforming regulations, strengthening institutions, supporting farmer cooperatives, enhancing competition, improving seed development and certification systems, expanding access to finance, and harmonizing regional trade policies.

Mobilizing private capital and market linkages through innovative financing mechanisms, digital platforms, and trade competitiveness measures, including whole-of-value-chain financing, lease-to-own guarantees, insurance, and blended finance instruments.

The World Bank concludes that advancing agro-industrialization is essential for Uganda to sustain growth, reduce poverty, and build resilience against economic and climate-related shocks.