Uganda established a strong record of prudent macroeconomic management and structural reform between the 1990 and 2000s. It was one of the first Sub-Saharan African countries to embark on liberalization and pro-market policies in the late 1980s. Over that time, a stable macroeconomic environment and sustained private sector-oriented reforms led to Uganda’s graduation into a mature reformer in 2006.
Gross domestic product (GDP) growth accelerated from an average of 6.5% per year in the 1990s to over seven percent during the 2000s. Growth remained well above the Sub-Saharan Africa average in the face of consecutive exogenous shocks, including the secondary effects of the global economic crisis, bad weather and surges in international commodity prices. This strong economic growth enabled substantial poverty reduction and some progress toward reaching Millennium Development Goals (MDGs).
The population of people living in poverty declined to 24.5% in 2009/10. Hence, Uganda has surpassed the 2015 Millennium Development Goal of halving the 56% poverty rate recorded in 1992/93, even though per capita GDP growth averaged only around four percent over the past two decades due to rapid population growth. Since FY2009/10, a combination of the exogenous shocks and domestic factors reduced economic activity down to below historical levels. Subdued export performance, high inflation and subsequent tightening of monetary policy to restore macroeconomic stability, reduced GDP growth to 3.4% in FY 2011/12.
The high expectations for a strong recovery GDP growth as the economy stabilized in FY12/13 have been thwarted by the lower than anticipated fiscal outlays, slow private sector credit pickup, and the governance related aid disruptions which increased economic uncertainty. On average, forecasters see a modest recovery of about five percent, which is still below the historical growth rates.
Following independence from British colonial rule in 1962, Uganda experienced a decade of relative political and economic stability. In 1971, a military coup by Idi Amin sparked a trajectory of violence and mismanagement that reduced the country to a failed state and a collapsed economy. Political and economic turmoil continued between 1979 and 1985, with successive coups, and a disputed election in 1980, resulting in civil conflict across the country. When the National Resistance Movement (NRM), led by Yoweri Museveni, took power in 1986, it began a period of sustained economic and political renewal. During the first decade of NRM rule, the government focused on restructuring the economy through pro-market reforms and increasing the legitimacy of government institutions through political liberalization. However, a brutal civil war waged by the Lord’s Resistance Army (LRA) in Northern Uganda left thousands dead and millions displaced, dampening economic activity and deepening poverty in the region. After protracted peace efforts, the LRA was pushed out of Uganda in 2005, and there have been no major security incidents since then. Economic activity has resumed in northern Uganda, and most internally displaced persons have returned to their land, with the poverty rate falling from 60% in 2005/06 to 45% in 2009/10.
Uganda has progressed towards multi-party democracy and now holds regular elections. Following the promulgation of the 1995 constitution, President Museveni was elected to a first term through a non-party election in 1996. He was reelected in a contested election in 2001.
The constitutional amendments approved by a referendum in July 2005 introduced multi-partyism, and Parliament lifted the two, five-year presidential term limits, which allowed President Museveni to seek a third term in office. (Recently, civil society groups have renewed their campaign for the restoration of presidential term limits in the Constitution and a private members bill has already been presented to the Speaker of Uganda’s parliament to this effect.) Museveni and his NRM Party won the first multi-party elections in 2006. On February 28, 2011 President Museveni was re-elected to yet another five-year term and his party enjoys an overwhelming majority in the 375-member Parliament.
President Museveni’s current term in office has been characterized by increased opposition action and mounting parliamentary pressure on the government, especially over governance. There have been periodic tensions between opposition protestors and security forces, especially in 2011. More recently, civil society organizations (CSOs) have been protesting over deteriorating governance, prompted by grand corruption scandals in public office. The government drafted and presented before Parliament the Public Order Management Bill 2011 that is aimed at regulating public gatherings and demonstrations. The ninth Parliament has helped to check the powers of the executive. Parliament’s Public Accounts Committee, constitutionally headed by a member of the opposition, has also remained strong in the fight against corruption.
On October 9, 2012 Uganda celebrated its 50th Independence Anniversary from British Colonial rule with a renewed emphasis on building a prosperous future for Ugandans and moving to middle income status within a decade.
With a per capita income of US$506, Uganda remains a very poor country and far from the middle income status it aspires to achieve in one generation. Although Uganda is set to meet the first MDG to eradicate extreme poverty and hunger, a vast majority of its non-poor population are classified as vulnerable. The lower poverty headcount has also yet to translate into gains in other welfare dimensions. There are concerns about uneven progress, with inequality increasing while there are distinct geographical patterns of unequal outcomes in health and education, and uneven access to basic social services.
In 2012 for example, Uganda ranked 161 of 187 countries on the Human Development Index compiled by the United Nations Development Programme. Estimates from the latest available Uganda National Survey also show that in 2009/10, only 12% of households used electricity for lighting.
Despite many efforts improve social sector outcomes; the odds of Uganda reaching all of the MDGs by 2015 are slim, as Uganda is off track on health-related MDGs. In the early 2000s, the government initiated a comprehensive program of health reforms to improve effectiveness, responsiveness, and equity in the health care delivery system, including abolishing user fees in government units, improving management systems, decentralizing service delivery and promoting public–private partnerships. These reforms have helped to improve sector performance and outcomes. They are also credited as being pro-poor, especially by improving access and reducing cost.
Despite reforms, Uganda is also off track on the MDGs related to universal primary education. Learning outcomes have been disappointing especially in reading and mathematics which are lower for Ugandan students than for Kenyan and Tanzanian students. However, gender equality prevails in school enrollment with little or no difference between net primary or secondary enrollment rates for boys and girls—near parity was reached in 2009/10.
To achieve higher development outcomes, Uganda’s economy has to transform to a higher productivity level while integrating all regions into the development process, a challenge which magnifies as the population swells. This transformation will hinge on how the country manages its resources, in particular the fast-growing and youthful population and the recently discovered oil. To reap the demographic dividend, Uganda must invest in fertility reduction, human capital formation, and productive employment creation. To reap the oil dividend, Uganda must maximize the social benefits through appropriate investment and prudent macroeconomic management, as well as transparency and management of expectations.
Perceived deterioration of governance and an increase in corruption (including the perceived growing culture of impunity for grand corruption and pervasive “quiet corruption”) threatens to tarnish Uganda’s image as a development model and challenge its future development efforts.
Last Updated April 2013
Uganda’s Development Strategy
Uganda’s development strategy hinges on the five-year National Development Plan (NDP) FY2011-2015. The NDP’s main theme is “Growth, Employment and Socio-Economic Transformation for Prosperity,” broadening the country’s development strategy from poverty reduction to structural transformation, and aiming to raise growth and living standards. The NDP is the first in a series of six plans intended to transform Uganda over thirty years into a modern and prosperous country. Launched in 2010, the NDP is set to expire in 2015 where the two remaining years of implementation will be guided by an on-going Mid-Term Review.
At Uganda’s 50th Independence Anniversary celebrations in October 2012, President Yoweri Museveni outlined his renewed vision for the country focusing on ten critical points:
Fighting ideological disorientation
Improving education to refine human resource
Facilitating private sector-led economic growth
Developing road, rail and electricity infrastructure
Market expansion through regional integration
Pursue industrialization for exports’ value addition
Develop the service sector to create jobs
Modernize agriculture to increase household incomes
Deepen democratic governance
In April 2013, the government launched the Uganda Vision 2040, an ambitious plan which aims to secure a GDP per capita of US$9500, a marked increase from the current US$506. The Uganda Vision 2040 will instill a series of five and 10-year Development Plans.
World Bank Assistance/ Engagement
Uganda joined the World Bank in 1963, a year after obtaining independence. Since then, the Bank has provided over US$8 billion in financing, with more than US$7.30 billion in loans and credits, and more US$650 million in grants. As of April 2013, the Uganda portfolio comprised 14 International Development Association (IDA)-financed operations with a net commitment amount of US$1.372 billion. IDA is the arm of the Bank that lends to the poorest countries. In addition, there are four regional projects (environment, trade and transport, health and agriculture) with net commitments of US$94.0 for the Uganda components.
The current sector distribution of IDA commitments reflects the government’s emphasis on infrastructure. About 59% of commitments are allocated to energy, mining, environment, urban development, and transport. About 33% are allocated to education, health and social development. About seven percent is allocated to the private sector.
Uganda is also benefiting from a large trust fund portfolio (approximately US$80 million in grants). Trust funds, most of which are linked to lending operations, have focused mainly on: environment; renewable energy (Global Environment Facility), demobilization and reintegration of ex-combatants (Multi-country Demobilization and Reintegration Program); monitoring and evaluation (Institutional Development Fund (IDF)); avian influenza; and piloting output-based aid in health and water supply (Global Partnership on Output-Based Aid). The United Kingdom’s Department for International Development (DFID) has become a key partner in IDA’s Uganda program, providing co-financing to the Northern Uganda Social Action Fund II (US$39 million) and the Transport System Improvement Project (US$8 million) and supporting the government’s implementation of the National Development Plan through a World Bank-executed partnership trust fund for analytical studies and technical assistance (TA) (approximately US$12 million). In addition, a Multi-Donor Trust Fund has been set up to fund various activities related to the Joint Budget Support Framework, including funding of a Technical Assistance and Support Unit.
The Bank’s analytical and advisory activities underpin investment operations and sector strategies, and inform the government’s reform path. Recent analytical work includes a series of the Uganda Economic Updates launched in February 2013, to be published twice a year. The first issue focused on Regional Trade and Integration. Others include a Synthesis Report on Promoting Inclusive Growth (2012 and a series of Public Expenditure Reviews focused on education (FY08), health (FY09), roads (FY10), and service delivery (FY13). Other reports such as the Public Finance Management in Uganda -- a Platform Approach (2008) with an assessment of fiscal decentralization, and the Public Expenditure and Financial Accountability Report (2009) have been critical in informing the reform agenda in public financial management.
The Bank’s Country Assistance Strategy
On May 25, 2010, the World Bank Board of Executive Directors discussed a new Country Partnership Strategy (CPS) to support Uganda. Hinging upon four pillars, this new strategy will support government efforts to promote inclusive and sustainable economic growth; enhance public infrastructure; strengthen human capital development; and improve good governance and value for money. It is estimated that during the CPS period, the IDA will commit approximately US$2 billion to support development projects and programs in Uganda.
Key priorities over the CPS period, in addition to continued support for national projects and regional integration in the transport and energy sectors, include the continuation of the poverty reduction support credit series with focus on improving efficiency and value for money in delivery of core services, a Municipal Infrastructure Project to improve management and accountability of fourteen secondary cities to support urbanization, and a Water Development and Management Project to finance investments in water support and sanitation, including several of the cities included in the Municipal Infrastructure Development Project.
Analytical and advisory services to be undertaken to support the government to address challenges in the medium to long term include analytical work on how to make Uganda’s growth inclusive, just-in-time policy notes on petroleum-related subjects and a Country Water Assistance Strategy to identify areas for interventions and reduce water-related vulnerability. Future Public Expenditure Reviews will focus on public investment financing and decentralized service delivery.
Uganda became a member of IFC in 1963. As of April 2013, IFC's portfolio in Uganda amounted to US$228.8 million, focusing on financial market, infrastructure, private health and education and investment climate. IFC will continue to support Uganda on business enabling environment, Public-Private Partnership (PPP) infrastructure advisory services, and access to finance for SMEs through the Africa Small Medium Enterprises (ASME) program for selected commercial banks. Additional operations in the forthcoming years include heightened focus on agribusiness intermediaries, supporting upgrading and expansion Umeme Ltd.’s power distribution network estimated to cost US$500 million over 6 years, finance sector development, infrastructure (including railways) and electricity generation companies. Among IFC’s recent commitments includes US$75 million financial support and mobilizing US$200 million for the rehabilitation and upgrading of the railways concession and a US$25 million loan to assist the expansion a Roofings Ltd’s steel coated zinc project at Namanve Industrial Park.
Uganda became a member of MIGA in 1992. As of April 2013, MIGA had a portfolio of three guarantees with a combined gross exposure of US$161 million. MIGA is supporting Globeleq Holdings (United Kingdom) with US$41 million in guarantees covering its equity investment in Umeme Ltd, the project company that has leased the electricity distribution grid of Uganda. MIGA is also supporting Sithe Global (USA) with guarantees of US$120 million covering its equity investment in Bujagali Energy Ltd. By supporting private investments in both generation and distribution, MIGA has played a key role in supporting the reform of Uganda’s electricity sector, undertaken with the support of the World Bank in 2002. Umeme Limited was awarded a 20-year electricity distribution concession to manage and operate the assets of Uganda Electricity Distribution Company from March 2005, becoming the first significant private operator of electricity distribution in all of Sub-Saharan Africa. The Bank and MIGA have worked closely together on helping the Government of Uganda and Umeme Ltd. provide a more reliable, safe, and affordable supply of electricity. MIGA also has a guarantee in support of an agribusiness investment.
There is close interaction with the IMF on the macroeconomic program.
More than 40 bilateral and multilateral development partners provide aid to Uganda, but only three partners account for almost half of the country’s total Official Development Assistance. The World Bank, the largest financier, accounted for 19 percent of the US$7.3 billion disbursed from 2004 to 2008; with the United States and the European Commission (EC) at 18% and 10%, respectively.
During the current CPS period, the Bank will continue to promote donor harmonization and aid effectiveness. The Bank is the permanent chair of the Local Development Partners’ Group (LDPG), which is the apex development partner forum in Uganda. The LDPG and its sector/thematic groups facilitate development partner coordination and interface with the government. In addition, The Bank is also permanent co-chair of the Joint Budget Support Framework.
The government’s National Development Plan includes a section on government-development partner relations, outlining key issues related to aid effectiveness and stating the government’s intention to adopt a new Partnership Policy, addressing alignment of aid with national priorities and systems, transaction costs, coordination issues, predictability of aid flows, mutual accountability for development results, and partnerships beyond aid. The Partnership Policy is expected to play an important role in managing aid over the medium term, as oil revenues gradually reduce the government’s reliance on external assistance.
Uganda’s development partners undertake periodic division-of- labor exercises to encourage selectivity. Once the new Partnership Policy is adopted, it is expected that development partners will undertake a new division of labour exercise under government leadership.. During the CAS period, the Bank will continue to encourage coordinated approaches at the sector level.
A New Joint Budget Support Framework
The government and development partners approved, for the first time, a Joint Budget Support Framework (JBSF) in October 2009, to reduce the transaction costs of budget support for the government, increase the predictability of disbursements, and create a stronger and more consistent policy dialogue that fosters mutual accountability in line with the Paris Declaration on Aid Effectiveness.
In the FY2010/11, the JBSF partners disbursed in excess of $300m to the Uganda government, or approximately 10 percent of the government’s budget. This budget support provides a platform for policy dialogue between the Ugandan government and its development partners - the JBS partners are committed to creating a conducive partnership with the government based on commitment, mutual accountability, trust and open dialogue.
JBSF partners. There are currently nine JBSF partners, including two multilateral development partners (European Commission, World Bank); and seven bilateral partners (Austria, Belgium, Denmark, Germany, Ireland, Sweden and the United Kingdom). The JBSF partners combined are expected to disburse over US$300 million per year, with the Bank accounting for about one third of the total.
The JBSF governance structure is two tiered:
A Development Partners Policy Committee meets regularly and engages with the government at an annual high-level forum;
At the technical level, the JBSF Technical and Policy Dialogue Taskforce coordinate the design and implementation of the JBSF and conducts an annual assessment of performance.
A Multi-Donor Trust Fund managed by the Bank was used to establish a Technical and Administrative Support Unit to provide administrative support and generate high-quality technical and analytical work.
Joint Assessment Framework
A framework is annually developed and agreed by the government and the JBSF partners, which is applied to assess the government’s performance in agreed areas. This forms the basis for development partners’ disbursement decisions, and also ensures timely disbursements.
Performance by the Ugandan government against the Joint Assessment Framework covering 2010/11 indicated that overall, the Ugandan government continues to show a reasonable level of commitment to the underlying principles of the JBSF.
Last Updated April 2013
In July 2006, Uganda received a total of US$3.764 billion in debt relief, combining International Development Association (IDA) debt relief provided under the Multilateral Debt Relief Initiative (US$2.780 billion) and the IDA portion of debt relief already committed under the Heavily Indebted Poor Countries Initiative (US$984 million).
While it is too early to assess the performance of the current Country Assistance Strategy, some results achieved under the previous strategy are highlighted below, aligned with the five pillars of the Ugandan government’s Poverty Eradication Action Plan (2004) (PEAP):
Pillar I: Economic Management
The World Bank’s policy dialogue with the government, mainly through the PRSCs, supported by analytical work, has contributed to a prudent fiscal and macroeconomic policy framework in Uganda. Focused spending on public administration, and improved public procurement procedures, has greatly increased the efficiency of public resource management. The CEM and PER on fiscal policy for growth have contributed to re-orienting the budget towards pressing infrastructure constraints. Notably, under the Second Private Sector Competitiveness Project, the time to register a property was reduced from 225 to 77 days and the time to register a business from 135 to 25 days, thereby reducing the cost of doing business in Uganda. The Bank also contributed to increased private sector access to credit through the same project.
Pillar II: Enhancing Production, Competitiveness and Incomes
Through the Regional Trade Facilitation Project, the Bank supported the creation of the African Trade Insurance Agency, which facilitates international trade by providing insurance against political risks. The PRCP-2 also supported the establishment of the land and company registries and the credit reference bureau, and contributed to, among other things, reducing the time to register a property and a business.
Bank interventions in the roads sector consisted of three phases of the Road Development Program (RDP1-3) amounting to US$263 million, the Road Sector and Institutional Support Project (RSISP), and the East Africa Trade and Transport Facilitation Project (EATTFP). Through the EATTFP, transit time through the Northern Corridor decreased from 15 days to 5 days for the Mombasa to Kampala route, and from 19 days to 8 days for the Mombasa to Kigali route. The border-crossing time at Malaba/Busia also declined from 15 hours to 2 hours. The three phases of the Road Development Program (RDP) contributed to establishing and/or upgrading a network of urban and rural roads and reducing average travel time and vehicle-operating costs. The program was informed by Bank analytical work on the transport sector strategy, environmental policy, management and financing. The Road Sector and Institutional Support Project contributed to the establishment of the Uganda National Roads Authority in 2008, and the approval of the Road Fund Act by Parliament in June 2008.
The Energy for Rural Transformation Project (ERTP) introduced a cross-sector approach to access expansion, providing key stakeholders in the health, education, water, agriculture, and local government sectors a direct role in planning and implementing energy investments. The project focused on establishing the regulatory and institutional framework for the sector. Additional achievements included installing and operationalizing more than 500 solar systems with a capacity of 117,000 watt-peak hours in health centers across the country, improving service delivery and enhancing safety. Twenty solar water-pumping systems, with a capacity of 196,000 watt-peaks, were installed and are operating in 14 districts countrywide. This least-cost energy solution has improved water supply in small towns and rural growth centers countrywide. The Power Project 4 has contributed significantly to improved energy supply and strengthened Uganda’s capacity to manage reform, privatization and development in the power and petroleum sub sectors, while the Privatization and Utility Sector Reform Project (PUSRP) supported an improved regulatory framework and investments in the distribution network.
Pillar III: Security, Conflict-resolution and Disaster-management
The Bank’s support under this pillar consisted of both lending and non-lending products, notably the NUSAF project and support to the Amnesty Commission through the MDRP. The support provided to the Uganda Amnesty Commission through the Bank-managed Multi-country Demobilization and Reintegration Program (MDRP) contributed to the return of ex-combatants to civilian life. The Northern Uganda Social Action Fund, a community-driven development project, started in 2003 and is now in its second phase. Under its first phase, more than three million people, or 47 percent of the population in northern Uganda, were provided access to improved social services: 67,000 households (336,000 people) have access to safe drinking water; and nearly 4,000 households (19,000 people) gained access to improved sanitation facilities.
Pillar IV: Good Governance
Through the PRSCs and the second Local Government Development Project (LGDP-2), the Bank supported the Government to develop, publish and roll-out the Harmonized Participatory Planning Guide (HPPG) improving planning and budgeting at local governments (LG); implement the Fiscal Decentralization Strategy. The Bank also contributed to ensuring compensation of LGs for taxes abolished. The second Economic and Financial Management Project (EFMP-2) supported improved government planning, budgeting and financial management.
Pillar V: Human Development
Through the PRSCs, the Bank provided support to the education sector reforms including the primary education curriculum review process and efforts focusing on improving the quality of education in addition to expanding coverage.
The 2007 education PER highlighted inefficiencies in primary education such as teacher absenteeism, inefficient teacher deployment, and underfunding of non-wage expenditures in public schools. Subsequently, the Bank initiated institutional support to the Directorate of Education Standards to strengthen teacher supervision systems through partnerships with the Ministry of Local Government. The 2008 health sector PER documented widespread waste and absenteeism and highlighted resource gaps. The policy recommendations provide the foundation for sector reforms and inform a project currently under preparation to strengthen health systems. Further, the CEM highlighted the impact of high population growth on the domestic policy agenda by highlighting the economic and fiscal consequences of unchecked population growth.