Starting in the late 1980s, the Uganda government has pursued a series of impactful liberalization policies. The resultant macroeconomic stability, post-conflict rebound, and investment response to the pro-market reforms generated a sustained period of high growth during 1987-2010. Real gross domestic product (GDP) growth averaged 7% per year in the 1990s and the 2000s, making it one of the fastest growing African countries. However, over the past decade, the country witnessed more economic volatility and gross domestic product (GDP) growth slowed to an average of just about 5%. With the population continuing to increase at a rate of 3% per annum, per capita income growth has decelerated from a rate of 3.6% recorded in the decades of 1990s and 2002, to about 2%. Going forward, a huge public investment program is expected to drive growth. Private investments is expected to be constrained by the uncertainties relating to the upcoming elections, to be heightened by the inflation pressures as the shilling continues to depreciate, and to the effects of a volatile global economy that could even be worsened by the slump in China and Brazil. Under these circumstances, the Ugandan economy is forecast to grow at a rate of approximately 5.6% in FY14/15. A modest upward trajectory into the medium is dependent on efficient implementation of large infrastructure program as well as takeoff of activities related to oil, both of which will boost construction activities.
The ruling National Resistance Movement (NRM), led by Yoweri Museveni, took power in 1986. Following the promulgation of the 1995 constitution, President Museveni was elected to a first term in 1996. He was re-elected 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 during the elections in 2006. Preparations for the General elections in February 2016 are well underway and are increasingly dominating the domestic agenda the next year. Preparations for the elections could lead to increased irregular and non-priority spending by Government through supplementary budgets. This has also been recognized in public statements by the head of the anti-corruption agency and is based on experience from the period leading up to the elections in 2011, which saw a rise in recurrent expenditure by 5 percentage points – mainly financed by domestic borrowing – which fueled inflation, forcing fiscal and monetary tightening, and in turn pushed commercial interest rates towards the 40 percent mark.
Uganda has 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. But the risks to Uganda’s economic prospects are significant and mainly relate to fiscal management in the face of election related pressures, poor performance in the area of domestic revenue mobilization; and the uncertainty regarding the date of commencement of oil production and the subsequent flow of revenues. Beyond these risks, Uganda’s growth and development is constrained by the low levels of productivity of both agricultural and non-agricultural sectors; inappropriate urban development; the slow development of infrastructure; and the limited availability of credit. This type of growth can neither shield the economy from shocks nor accelerate its rate of economic growth to higher levels of prosperity.
Last Updated: Oct 01, 2015