Uganda’s Economy Grows 6.3% as World Bank Pushes Agro-Industrialization Drive

The robust performance was underpinned by a recovery in household consumption, accelerated government spending, and sustained growth in both public and private investment.

Uganda’s economy continues to demonstrate strong resilience, 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 the World Bank’s latest Uganda Economic Update: Cultivating Prosperity Through Agro-Industrialization. The robust performance was underpinned by a recovery in household consumption, accelerated government spending, and sustained growth in both public and private investment.

The report attributes the momentum to dynamic domestic demand, alongside solid performance in agriculture and tourism, which together generated broad-based growth across agriculture, industry, and services. As a result, poverty levels are projected to have declined during FY2024/2025, reflecting improved livelihoods and income opportunities.

Fiscal Pressures and Policy Priorities

Despite the strong growth, fiscal pressures have intensified. The World Bank notes a widening fiscal deficit and rising debt-servicing costs, highlighting the urgency of returning to fiscal consolidation as outlined in Uganda’s FY2025/2026 national budget. The report emphasizes the need to enhance domestic revenue mobilization and rebalance public spending toward education, health, and infrastructure, while safeguarding debt sustainability and maintaining macroeconomic stability.

Now in its 26th edition, the Uganda Economic Update is a twice-yearly flagship report assessing recent economic performance and near-term prospects. The latest edition projects a positive medium-term outlook, with gradual improvements expected in both fiscal and external balances.

Medium-Term Outlook and Risks

The World Bank projects that Uganda’s growth trajectory will be supported by moderating government spending after the general elections, the anticipated start of oil revenues in 2027, continued export dynamism, and sustained inflows of foreign direct investment. Inflation is expected to remain low, anchored by prudent monetary policy and relatively stable global commodity prices.

In line with these projections, poverty is expected to continue declining in 2026 and 2027. However, the outlook is subject to significant 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 pronounced, as lower-than-expected rainfall and extreme weather events could increase poverty, given that most of Uganda’s poor depend on rain-fed agriculture.

Agro-Industrialization as a Growth Catalyst

The report underscores agro-industrialization as a central pillar of Uganda’s development strategy and a key pathway for economic transformation. While the sector holds immense potential for job creation, value addition, and inclusive growth, Uganda continues to lag behind regional peers due to persistent structural challenges.

The World Bank identifies four major constraints holding back agro-industrialization:

First, weak foundations in primary production, characterized by low adoption of modern inputs such as fertilizers, improved seeds, and mechanization, compounded by soil degradation and limited irrigation.

Second, weak governance and institutional capacity, reflected in poor coordination, regulatory gaps, and limited enforcement that undermine effective service delivery and sector policies.

Third, limited access to finance and infrastructure, with agriculture receiving a small share of bank lending, facing high interest rates, inadequate insurance coverage, and insufficient physical and digital connectivity.

Fourth, high vulnerability to climate shocks, including more frequent floods, droughts, and pest outbreaks that threaten productivity, food security, and rural incomes.

Key Policy Recommendations

To unlock the sector’s potential, the World Bank outlines three priority reform areas:

Strengthening foundations and infrastructure, including the development and dissemination of climate-smart agricultural technologies, expanded irrigation to build resilience, co-located rural infrastructure such as roads, energy, and water, skills development, and digital platforms for agricultural service delivery.

Improving the policy and enabling environment through regulatory reforms, stronger institutions, support for farmer cooperatives, enhanced competition among private sector players, improved seed development and certification systems, increased access to finance, and harmonization of regional trade policies to reduce barriers.

Mobilizing private capital and market linkages by scaling up innovative financing mechanisms, leveraging digital platforms, and enhancing trade competitiveness. This includes developing whole-of-value-chain financing instruments and expanding access to finance through lease-to-own guarantees, insurance products, and blended finance.

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

Tags: Uganda economy, World Bank, Uganda Economic Update, GDP growth, agro-industrialization, fiscal policy, poverty reduction, agriculture, development strategy, climate resilience