Overview

Economic Overview

Since the late 1980s, the government has pursued a series of stabilization and pro-market structural reforms, resulting in a sustained period of high growth and poverty reduction during 1987-2010.

Real gross domestic product (GDP) growth averaged 7.3% between 2000 and 2010, placing Uganda amongst the fastest growing economies in the world. Due to rapid population growth, however, the increase in per capita income was just above 3% per year.

In the past decade, the country has witnessed more economic volatility, and GDP growth has slowed to an average of about 5%. As the economy becomes more resilient and election-related uncertainties recede, economic growth is expected to accelerate to about 5.5% in FY17, and average 6-7% in FY18-20. In the short term, large public sector infrastructure projects will continue to be the main driver of economic activity as the economy.

The country’s economic growth faces a number of risks, key among them, failure of the planned heavy public investment program. Other notable risks include a larger global economic disturbance than has been projected and regional instability especially in South Sudan and the Democratic Republic of Congo, as well as unanticipated weather and climate related changes. Moreover, a further slow-down in the Chinese economy could adversely impact Uganda’s planned investments in infrastructure. Other macroeconomic vulnerabilities include currency depreciation, inflation, and high interest rates.

Political Context

Following the end of the armed conflict in 1986, the ruling National Resistance Movement (NRM) led by President Museveni introduced a number of structural reforms and investments, which led to a sustained period of high growth and poverty reduction between 1987-2010.

With ambitious public sector reforms introduced the past two decades, the last three years have seen an improvement in government effectiveness. At the same time, voice and accountability, which improved between 2003 and 2008, have declined. The policy and legal frameworks continue to improve, notably through the Public Financial Management Act (2015), albeit implementation gaps in key areas of procurement and anti-corruption remain. Strategies, guidelines and programs are generally sound, but weaknesses in applying sanctions and public service effectiveness constrain implementation and service delivery.

President Museveni was re-elected in February, 2016, for another five-year term. The election was the most contested in Uganda’s history with high voter turnout at 67.6%, up from 59.3% in 2011. As in 2011, election observers reported irregularities, and incidents of intimidation and harassment, as well as restrictions to freedom of speech, and unequal access to resources and the media.

Development Challenges

Uganda surpassed the Millennium Development Goals (MDGs) target on halving poverty by 2015, and made significant progress in reducing the population that suffers from hunger, promoting gender equality and empowering women. According to the Uganda Poverty Assessment, the proportion of the population living in extreme poverty ($1.90 a day) fell from 62.2% in 2002/03 to 33.2% in 2012/13, representing the second fastest reduction in poverty in Sub-Saharan Africa. Using the national poverty line ($1.25 a day), the incidence of poverty declined from 56.4%in 1993 to 19.7% in 2013. Poverty reduction was mainly driven by agriculture, urbanization, and education.

Despite progress, poverty and vulnerability remain in the Northern and Eastern regions, which account for 84% of those living beneath the national poverty line. For every three Ugandans who get out of poverty, two fall back in, demonstrating the fragile gains in the country’s poverty success.

Uganda has one of the world’s youngest populations, half of them under the age of 15 years. The fertility rate is estimated at 5.7 children per woman (2015), and with a 3.3% population growth the dependency ratio is high with significant consequences for national development.

Persistent gender inequality, including challenges related to preventing gender-based violence (GBV), have continued to impact women’s decision making, access to social services and economic opportunities.

Uganda is now hosting around 750,000 South Sudanese refugees, according to an October update from the UN Refugee Agency (UNHCR). This is putting a strain on host communities, with local government authorities and agencies unable to cope or provide basic and essential services.

Last Updated: Dec 08, 2016

World Bank Group Engagement

The World Bank Group (WBG) Country Partnership Framework (CPF) for the period 2015/16 to 2020/21 supports the government’s vision of a transformed society from a peasant economy to a modern and prosperous country by 2040. The CPF has been prepared in close collaboration with the government, and is informed by consultations with civil society, private sector, academia, development partners, and the public. It recognizes the dynamic between rural and urban development where poverty reduction in the short run predominantly will come from rural areas through the agriculture sector where most of the poor and vulnerable find their livelihoods.  The focus in the medium term will shift towards urbanization and creation of jobs for the rapidly growing labor force.

Under the CPF, the WBG supports Uganda to raise rural incomes by spurring agricultural commercialization and by enhancing the resilience of poor and vulnerable Ugandans. The WBG also promotes inclusive growth in urban areas, and supports private sector competitiveness and investments in planning and infrastructure. The WBG and development partners provide support to the government for the improved delivery of health and educational services and enhanced economic governance and fiscal management.

The CPF is implemented through a range of complementary instruments. Advisory services and analytics constitute an important part of WBG country engagement alongside the facilitation of global knowledge exchange, and financial support.

The investment portfolio in Uganda is primarily financed from the WBG’s International Development Association (IDA), which provides loans or “credits” and grants to low-income countries on concessional terms. Uganda’s current IDA loans are interest-free and attract only an administrative service charge of 0.75% on the disbursed amount. Loan repayments are stretched over 38 years, including a six-year grace period.

As of October 2016, the Bank’s portfolio stood at $2 in net commitment with about $200 million in grants. Approximately half of this is supporting infrastructure (energy, roads, urban, and ICT), followed by agriculture (13%), health (11%), education (10%), social protection (7%), water (6%), and private sector and trade (5%). As of June 30 2016, disbursement stood at 10% with an undisbursed balance of $1.8 billion. Effective August 22, 2016, the WBG   decided to withhold new lending to Uganda while reviewing the country’s portfolio, in consultation with government. The WBG is actively working with the government to address the outstanding performance issues, including delays in project effectiveness, weaknesses in safeguards monitoring and enforcement, and low disbursement. However, all projects approved by the Board before August 22, 2016, are not affected by this decision, and will continue to be implemented.

A key element of the CPF is the strong emphasis on partnerships and beneficiary feedback. This involves an enhanced focus on systematically utilizing different platforms for collecting real-time and actionable feedback from citizens on key issues related to WBG support. It also involves stronger engagements with citizens and beneficiaries during implementation to ensure that project designs are responsive to local demand, and to track progress, manage risks, and inform project adjustments. 

By continuously receiving feedback from citizens, and by working closely with the government, stakeholders and partners, the WBG is in a strong position to effectively contribute to boosting shared prosperity and reducing extreme poverty in Uganda. Questions and comments are therefore welcome and can be forwarded to ugandainfo@worldbank.org.

Last Updated: Dec 08, 2016

Competitiveness and Enterprise Development Project (CEDP): The project has supported land administration reform, including piloting mass titling in selected regions in the country. As a result, government has successfully established 13 regional land offices which have enabled more people to register and title their land, increasing security of tenure and allowing land owners to use their land as an asset to access credit. The project also supported the digitization of existing land titles (more than 500,000 titles) and reduced the time it takes to register to within 42 days – down from 66 days in 2011.  Digitization has increased government revenue from land registration by 308%. Monthly collections have gone up from $ 739,210 (2013) to approximately $3.5m (2015) from stamp duty collections (97%) and fees (3%).

Uganda Support for Municipal Development Project (USMID): The government has been supported to prepare a land acquisition and resettlement policy, an investment sector plan for the Ministry of Lands, Housing and Urban Development for FY 2016-2021, and to establish a complaints handling strategy and desk to respond more effectively to public inquiries and engage citizens more proactively. Local government officials in all 14 municipalities benefitting from the project have received training in various aspects of municipal management, including physical planning and urban development, source revenue enhancement and procurement and contract management. Computerized equipment for physical planning has been installed in 13 municipalities to improve service.

Private Sector Competitiveness Project II: The project has facilitated the recruitment of a secretariat to support business licensing reform work under the International Finance Corporation (IFC) Uganda Investment Climate Program. Key results achieved include:  Reducing trading license time from 15 to four days, and reduction of fees by 25% across all segments of businesses. This reform benefitted more than 500,000 and led to annual private sector cost savings in excess of $2.5 million.

Health Systems Strengthening Project: Eight of nine hospitals have been renovated. Scholarships have been provided to 797 health workers with most of the beneficiaries pursuing diploma courses, and more than 400 have completed their studies. As many as 230 health facilities countrywide have received medical equipment, and an e-recruitment job bureau at the Health Service Commission has been set up. Through the project, the government will be able to strengthen management capacity for frontline health service delivery and ensure functionality of the existing health infrastructure.

 East Africa Public Health Laboratory Project: supported the Uganda National Tuberculosis Reference Laboratory to reach the gold standard ISO accreditation, and to qualify to serve as a prestigious WHO Supranational Referral Laboratory, the second of its kind on the continent. The project has also empowered countries to provide leadership regionally and serve as centers of excellence for disease control efforts through expanding the pool of qualified personnel and developing a regional framework for cross-border surveillance. The 2014 Ebola outbreak highlighted major gaps in disease prevention and control efforts in health systems across East Africa.

Second Northern Uganda Social Action Fund (NUSAF 2): NUSAF is a community-driven development project, now in its third phase (NUSAF 3) which started in September 2016. In all, a total of 10,519 community-owned sub-projects were supported over the five-year course of NUSAF 2, exceeding the originally planned 9,750 sub-projects. To prevent corruption and mismanagement of project funds, NUSAF II worked with the Inspectorate of Government (IGG) to design the Transparency, Accountability and Anti-Corruption (TAAC) initiative implemented by a consortium of NGOs which successfully piloted Social Accountability and Community Monitoring (SACM) within the project areas. By the end of the project, the TAAC initiative, which cost $2 million, had facilitated 100% accountability of funds disbursed to community sub-projects, making NUSAF2 one of the most successful community driven projects ever undertaken in Uganda.

Kampala Institutional and Infrastructure Development Project (KIIDP):, institutional efficiency has been registered by the Kampala Capital City Authority (KCCA) through reduction of overdue liabilities, increase in KCCA own source revenue and increased share of KCCA own source revenue spent on service delivery. KIIDP II will address the city’s investment bulk-log.

East Africa Trade and Transport Facilitation Project (EATTFP): Border clearance times have significantly reduced and are now among the lowest in East and Southern Africa. 

Last Updated: Dec 08, 2016

The International Finance Corporation (IFC)

As of June 2016, IFC had commitments amounting to $275.7 million, of which $269.7 million was disbursed and outstanding. IFC’s strategy in Uganda is harmonized with the World Bank Group’s approach as outlined in the FY16-21 Country Partnership Framework (CPF). In line with this approach, IFC, through investment and advisory (PPP) interventions, is actively developing projects in infrastructure as well as the oil sector. IFC has worked closely with the Bank and MIGA on a private power generation and distribution projects, and continues to collaborate closely within the WBG with a focus on renewable energy.

In the financial sector, IFC targets strengthening private sector access to finance through trade lines to bank, local currency, housing financing and small and medium enterprises (SME) finance. IFC will also proactively develop agribusiness projects through investment and advisory (Investment Climate) programs, enhancing agricultural productivity, with a special focus on food security and addressing the lack of market access by smallholder farmers through a wholesale approach linking integrators to raw material suppliers. IFC will assume a more opportunistic approach to projects in the manufacturing and services sectors.  

Since the 1960s, IFC has approved funding for more than 50 projects in Uganda, amounting to $1.5 billion. These investments have boosted power supply, increased farmer’s revenues and supported small and medium enterprises. IFC’s advisory services focus on business environment, health, education, housing finance and infrastructure.

Investment Portfolio (as of June 30, 2016)

 

Client

Sector

Committed Portfolio (in US$ m)

Bujagali Energy

Electric Power

112.3

Umeme

Electric Power

75.1

Eaton Uganda

Professional, Scientific and Technical Services

41.4

KCB Uganda

Finance & Insurance

10.0

Roofings

Primary Metals

8.1

Orient Bank Ltd

Collective Investment Vehicles

5.8

DTB Uganda

Finance & Insurance

4.6

Merryland School

Education Services

4.1

PINE

Construction and Real Estate

3.8

Pearl Dairy

Food & Beverages

3.7

GroUganda

Collective Investment Vehicles

3.0

Biyinzika

Collective Investment Vehicles

1.7

Maarifa

Collective Investment Vehicles

1.0

Global Woods

Collective Investment Vehicles

0.6

Finance Trust

Collective Investment Vehicles

0.2

Vine

Collective Investment Vehicles

0.1

Sindila Hydro

Collective Investment Vehicles

0.1

Diamond Trust

Finance & Insurance

0.1

Total

 

275.7

 Multilateral Investment Guarantee Agency (MIGA)

As of August 2016, MIGA had a portfolio of four guarantees with a combined gross exposure of $146 million. The MIGA portfolio is primarily focusing on guarantees covering its energy infrastructure. MIGA also supported Sithe Global (USA) with guarantees of $120 million covering its equity investment in Bujagali Energy Ltd.

Last Updated: Dec 08, 2016


LENDING

Uganda: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments