From Growth to Transformation: Why Uganda Must Invest in Early Childhood Development

Uganda’s economy is growing steadily, but long-term prosperity hinges on investing in early childhood development (ECD) to build a skilled workforce. Strengthening education, healthcare, and childcare services will unlock the country’s demographic dividend and drive sustainable economic transformation.

The 24th Edition of the Uganda Economic Update, published by the World Bank in collaboration with the Uganda Bureau of Statistics (UBOS), the Bank of Uganda (BoU), and the Ministry of Finance, Planning and Economic Development (MoFPED), provides an in-depth analysis of Uganda’s economic trajectory, highlighting the country’s resilience amidst global uncertainties. Uganda’s economy grew by 6.1% in FY2023/24, up from 5.3% the previous year, driven by strong performances in agriculture, industry, and services. The manufacturing, construction, and electricity sectors saw significant gains, while agriculture benefited from favorable weather conditions. In the first quarter of FY2024/25, the economy expanded by 6.7%, reflecting sustained recovery in external trade and agricultural productivity. Inflation declined substantially, averaging 3.2% in FY2023/24 compared to 8.8% in FY2022/23, supported by stable exchange rates, tight monetary policies, and easing global economic shocks. However, risks remain, including delays in oil production, climate shocks, fiscal imbalances, and geopolitical uncertainties, particularly in the Middle East, a key export market for Uganda.

Fiscal Challenges and the Need for Revenue Reforms

Uganda’s fiscal position improved as the deficit narrowed to 4.8% of GDP in FY2023/24, but concerns persist over frequent supplementary budgets, which accounted for 8.9% of total spending, undermining fiscal discipline and long-term planning. Domestic revenue mobilization continues to lag, with tax collections falling 1% of GDP below targets due to the slow implementation of tax reforms such as the Electronic Fiscal Receipting Invoice System (EFRIS) and Digital Tax Stamps. The country remains heavily reliant on domestic borrowing, which covered over 90% of the fiscal deficit, raising concerns over debt sustainability and private-sector credit constraints. The current account deficit stood at 7.9% of GDP, reflecting a sharp rise in import demands for oil-related infrastructure projects and weak financial inflows. Foreign exchange reserves declined to $3.2 billion, covering only three months of imports, emphasizing the need for continued fiscal prudence and export diversification.

Oil Production and Future Economic Prospects

Uganda’s economic outlook remains promising, with real GDP growth projected at 6.2% in FY2024/25 and accelerating to 10.8% in FY2025/26 as oil production begins. Oil revenues, expected to peak at $3.3 billion annually by 2030, will provide critical fiscal support, potentially reducing debt burdens and financing key development projects. However, effective governance of oil revenues is crucial to prevent economic distortions associated with Dutch disease. The government’s Charter for Fiscal Responsibility (CFR) outlines fiscal rules to manage revenue volatility, but further strengthening of regulations and oversight is necessary to ensure transparency and sustainable resource allocation. Beyond oil, Uganda’s ability to sustain long-term growth depends on significant investment in human capital, particularly in early childhood development (ECD), to cultivate a skilled and productive workforce. With one of the world’s fastest-growing young populations, Uganda has a narrow window to harness its demographic dividend before the youth bulge becomes a socio-economic burden.

The Urgent Need for Early Childhood Development Investments

Uganda’s human capital investment remains insufficient to support long-term economic transformation. The World Bank’s Human Capital Index (HCI) indicates that a child born in Uganda today will only reach 39% of their productivity potential due to inadequate access to quality education, healthcare, and nutrition. Public spending on education stands at 2.7% of GDP, below the recommended 4% threshold, while healthcare spending is underfunded and heavily reliant on external donors. Early childhood is a critical period for brain development, yet only 1 in 10 children have access to formal early childhood education. Furthermore, 25% of Ugandan children under five suffer from stunting, which has long-term implications for cognitive and physical development. Without urgent investments in ECD programs, Uganda risks missing out on its demographic dividend, limiting its future workforce’s productivity and global competitiveness.

Strengthening early childhood development programs would yield immediate and long-term economic benefits. Expanding pre-primary education would enhance school readiness, reduce dropout rates, and improve primary education outcomes. Providing affordable childcare services would enable more women to enter the workforce, increasing labor participation and economic growth. Currently, women bear a disproportionate burden of unpaid childcare, limiting their ability to engage in income-generating activities. Supporting parental education programs would ensure that caregivers can provide nurturing environments crucial for childhood development.

Four Key Priorities to Strengthen Early Childhood Development

To build a strong foundation for Uganda’s future workforce, the government must prioritize four key areas. First, expanding primary healthcare and nutrition services is essential to combat malnutrition and reduce stunting, ensuring children receive proper early-life healthcare. Second, introducing free, government-funded pre-primary education would bridge early learning gaps and improve educational outcomes, particularly for low-income families. Third, developing affordable childcare models, especially for women in the informal sector, would increase female labor participation and household incomes, leading to economic growth. Finally, scaling up parenting support programs would equip caregivers with knowledge and resources to foster a stimulating and safe home environment for children.

With a well-executed ECD strategy, Uganda can transform its young population into an economic asset, rather than a demographic challenge. Investing in early childhood development would not only improve individual life outcomes but also strengthen Uganda’s economic trajectory, fostering a highly skilled, innovative, and productive workforce. These investments must be backed by increased public financing, policy coordination across sectors, and robust implementation frameworks to ensure that no child is left behind in Uganda’s pursuit of economic prosperity.