Uganda was among the first Sub-Saharan African countries to embark on liberalization and pro-market policies in the late 1980s. Real gross domestic product (GDP) growth averaged 7% per year in the 1990s and the 2000s, but from 2006 and onwards, the country witnessed more economic volatility and gross domestic product (GDP) growth slowed to an average of just about 5%. New statistical evidence from the rebasing of national accounts to FY2009/10 and the 2014 population census suggests that the Ugandan economy is about 20% larger than had previously been calculated, while the population is 3% smaller. Going forward, a huge public investment program is expected to drive growth while private investments remain subdued. The economy is forecast to grow at a rate of approximately 5.6% in FY14/15, and could maintain an upward trajectory into the near future, as oil investments and the large infrastructure program boost construction activities. The agricultural sector, which employs the bulk of the labor force, is unlikely to achieve high rates of growth due to supply-side constraints, such as limited use of improved inputs, lack of irrigation systems and low levels of mechanization.
The country has to manage a number of risks, particularly fiscal risks associated with low revenues in the face of reduced aid inflows to Uganda, the sequencing and overall management of the financing and implementation of the government’s huge infrastructure development program, and spending pressures, all of which could disrupt spending plans.
When the National Resistance Movement (NRM), led by Yoweri Museveni, took power in 1986, the government started to focus on restructuring the economy through pro-market reforms and increasing the legitimacy of public institutions through political liberalization. However, a 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. 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.
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. 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. The next elections are scheduled to take place in February 2016.
Uganda has made important progress towards meeting the Millennium Development Goals (MDGs), especially with respect to income poverty, promoting gender equality and women empowerment reducing child mortality, ensuring environmental sustainability and developing a global partnership for development. The two decades of strong economic growth with poverty reducing from 56% in 1992-93 to 19.7% by 2012-13, thus surpassing the 2015 MDG target of halving the poverty rate. However, Uganda remains a very poor country. Despite declining poverty rates, the absolute number of poor has decreased relatively little due to high population growth with Uganda’s population doubling since 1990. Moreover, the poverty line is low and many remain poor and vulnerable to poverty. Inequality is also high by international standards (0.438), which could undermine the achievements in growth and poverty reduction. A key challenge to accelerating progress towards middle income status and promote shared prosperity is to raise productivity in sectors where most people are employed or move people from low to higher productivity activities.
Health-related Millennium Development Goals (MDGs), including child and maternal mortality rates, remain low, while progress that had been achieved on access to HIV/AIDS, malaria and tuberculosis treatment has reversed in some aspects. Uganda is also off-track on the MDGs related to universal primary education. Performance of the North and North-East regions is lagging for most indicators, while the South-West performs worst on health-related indicators. At the same time, many people who are not poor, are still classified as vulnerable, partly because the majority of the population derives livelihood from agriculture.
Uganda: Commitments by Fiscal Year (in millions of dollars)*
*Amounts include IBRD and IDA commitments
‘Uganda Vision 2040’ aspires to transform the country from a low-income to a competitive upper middle-income country with a per capita income of $9,500. In the medium term, Uganda is seeking to become middle-income country by 2020. The government’s Vision is delivered through a series of five-year National Development Plans (NDPs), the first of which is coming to an end in fiscal year (FY) 15. The NDPs are designed to be the primary government national strategic plan and guide Uganda’s fiscal strategy. The National Planning Authority(NPA) is currently preparing the second NDP for the period FY16-FY20. The second NDP aims at increasing overall competitiveness; creating additional wealth and employment while emphasizing inclusive and sustainable growth. The Plan prioritizes key development opportunities and fundamentals in agriculture, tourism, mineral development, infrastructure and human development. A key challenge will be to address the implementation constraints, which has affected the implementation of the first NDP.
World Bank Group Engagement
The World Bank Group’s current strategy is outlined in the Country Partnership Strategy (CPS) FY11-15, which is firmly anchored in the government’s first NDP. The CPS hinges on four pillars: inclusive and sustainable economic growth, public infrastructure, human capital development, and good governance and value for money. The CPS progress report in July 2013 re-confirmed the relevance of the objectives, but led to some adjustments and a focus on fewer, larger and transformational projects with emphasis on infrastructure, agricultural productivity and access to market, skills development, and investments in the social sectors. The Bank is currently preparing a Systematic Country Diagnostics for Uganda, which will inform the next Country Partnership Framework.
Uganda: Commitments by Fiscal Year (in millions of dollars)*
*Amounts include IBRD and IDA commitments
The World Bank Group (WBG) has a long-standing and strong partnership with the Government of Uganda. The partnership dates back to 1963, and since then the WBG has funded over 100 development projects with financing totaling over $8 billion, which have been complemented by analytical and advisory services.
The WBG’s engagements in Uganda are aligned to the national development goals and priorities and guided by the Country Partnership Strategy (CPS) FY11-15. The CPS is hinged on four strategic objectives: (i) Promote Inclusive and Sustainable Economic Growth; (ii) Enhance Public Infrastructure; (iii) Strengthen Human Capital Development; and (iv) Improve Good Governance and Value for Money.
Pillar I: Promote Inclusive and Sustainable Economic Growth
The periodic expenditure reviews (PER) have been the foundation for policy dialogue with the government on where to spend public resources, how to spend these resources, and monitoring spending for results. They became especially critical starting in the early 2000s as the government embarked on budget reforms both at central and local government levels. During the mid-2000s, the 2004 PER adopted an integrated approach to address budgetary and financial accountability challenges at all levels of the government. These integrated volumes highlighted the progress that had been achieved by Uganda in strengthening the public financial management (PFM) legal and regulatory framework, but also highlighted the remaining risks, related especially to enforcement of procurement and payroll rules and procedures and independent oversight. In 2007, the PER focused on securing fiscal policy for growth quantified the huge waste of public resources in the Public Sector (e.g. through absenteeism), and became the first of a programmed series.
To enhance the effectiveness of Uganda’s Public Investment Program (PIP), the WBG’s 2010 study, Strengthening the Effectiveness of Public Investment in Uganda, assisted the government to direct resources to those investments that provide the highest economic and social return, in light of the increasing public investments from the government’s own resources, development partners’ and from the anticipated oil revenues. The public investment management processes in place were found not to be adequate to secure value-for money. The report therefore showed how to enhance PIP by improving the different stages of the PIPs right from conception, quality proposals, budgeting, and all the way through implementation and evaluation.
Pillar II: Enhance Public Infrastructure
Through the East Africa Trade and Transport Facilitation Project (EATTFP), transit time through the Northern Corridor decreased from 15 days to five days for the Mombasa to Kampala route, and from 19 days to eight days for the Mombasa to Kigali route. The border-crossing time at Malaba/Busia also declined from 15 hours to two hours. The Road Sector and Institutional Support Project (RSISP) that financed three phases of the Road Development Program (RDP) contributed to establishing and upgrading a network of urban and rural roads and reducing average travel time and vehicle-operating costs. The RSISP also contributed to the establishment of the Uganda National Roads Authority in 2008.
The Energy for Rural Transformation Project (ERTP) has supported establishing an appropriate regulatory and institutional framework for the sector, as well as installing and commissioning 522 solar systems with a capacity of 372,000 watt-peak in health centers; 560 solar systems with a capacity of 823,000 watt-peak in rural post-primary schools; and twenty nine solar water-pumping systems with a capacity of 390,000 watt-peak. Another project, the Power Sector Development Operation Project (PSDO) 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) has supported an improved regulatory framework and investments in the distribution network. Through a partial risk guarantee (PRG) operation, support will be provided to small-scale renewable energy power projects sponsored by private developers. These small-scale power projects will supply electricity to the main grid and reduce the anticipated power shortages in the years leading to the commissioning of the planned large hydropower plants (Karuma and Isimba). In addition to generation, the WBG is also supporting strengthening and extension of transmission and distribution networks, leading to a reduction in distribution losses from 35% in 2005 to 23% in 2013.
Pillar III: Strengthen Human Capital Development
The Universal Primary Education launched in 1997, and later, the $33.5 million Millennium Science Initiative (MSI) project that closed in June 2013, funded research and facilitated cooperation between the private sector, universities and research organizations.
Through the Poverty Reduction Support Credits (PRSCs), the WBG also 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 Public Expenditure Review (PER) highlighted inefficiencies in primary education such as teacher absenteeism, inefficient teacher deployment and underfunding of non-wage expenditures in public schools. Subsequently, the WBG initiated institutional support to the Directorate of Education Standards to strengthen teacher supervision systems through partnerships with the Ministry of Local Government. With IDA financing, a curriculum review for lower secondary education has been finalized. WBG support is also being developed in Business, Technical and Vocational Training (BTVET), through a skills development program aimed at creating employable skills and competencies relevant in the labor market and the oil sector.
The Northern Uganda Social Action Fund, a community-driven development project, started in 2003 and is now in its second phase. Under phase one, 47% (more than 3 million) of the population in northern Uganda, were provided access to improved social services. The second phase has focused on improving access of the population in Northern Uganda and the Karamoja region to income generating opportunities and basic socio-economic services.
Pillar IV: Improve Good Governance and Value for Money
Through the PRSCs, the Local Government Management Services Delivery Project, and the Uganda Public Service Performance Enhancement Project, the WBG has supported the government to implement key public financial and procurement management and institutional development reforms to enhance management of public resources. Further, through the Governance Partnership Facility (GPF) window, one grant has supported the development of corruption tracking indicators and production of annual reports on corruption trends in social sectors and a citizen’s engagement framework to increase role of non-state actors in monitoring corruption. Through GPF the WBG is also supporting a selection of civil society organizations (CSOs) to monitor public contracts and ensure value for money.
Through the 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.
As of March 2015, the IDA portfolio for Uganda comprised 15 active projects, including two global environment facility (GEF) projects. The total net commitment amounts to $1.9 billion. In addition, Uganda benefits from a $100m Global Partnership for Education grant and five regional projects with a net commitment of $134million. In line with government priorities, roughly 65% of the WBG’s support is allocated to infrastructure, about 30% to education, health and the social services, and approximately 5% to private and public development. Uganda is also benefiting from a large trust fund portfolio $202.2m implemented through 28 trustee grants and 79 child grants as a result of the WBG’s strategic collaboration with bilateral and multi-lateral development partners. These cover all sectors including IFC programs and co-funding of trust funds with IDA lending projects.
The WBG’s analytical and advisory activities underpin investment operations and sector strategies, and inform the government’s reform path. Recent analytical work includes the bi-annual series of the Uganda Economic Updates analyzing issues such as regional trade and integration, jobs and employment, decentralized service delivery, country’s pension system and most recently on urbanization. Other analytical and advisory activities have focused on water coverage in Kampala’s Informal Settlements (2014); Tourism in Uganda (2013); Promoting Inclusive Growth (2012) and a series of Public Expenditure Reviews focused on education, health, roads, and service delivery.
The World Bank Group (WBG) has also embarked on developing a Systematic Country Diagnostic (SCD), which is a technical evidenced-based report expected to diagnose the main challenges and opportunities facing the country in achieving the WBG’s twin goals of reducing extreme poverty to 3% by 2030 and boosting shared prosperity (consumption growth of the bottom 40%). SCDs underpin the Country Partnership Framework (CPF) between the World Bank Group and client governments. It is expected to stimulate an open and forward-looking dialogue between the WBG, client governments and the broader public, with a focus on what is important for the country’s development agenda.
IFC has approved funding for more than 50 projects in Uganda amounting to $1.5 billion, focusing on improving the investment climate, building the capacity of Small and Medium Enterprises (SMEs) and micro-enterprises and the institutions that can support them, and providing proactive support to project development in the areas of finance, agribusiness, and infrastructure. The IFC will continue to support to the business-enabling environment, public-private partnership (PPP) infrastructure advisory services, and access to finance for SMEs through the Africa small-medium enterprises program for selected commercial banks. Additional operations in the forthcoming years include heightened focus on agribusiness intermediaries, supporting upgrading and expansion of Umeme Ltd.’s power distribution network estimated to cost $500 million over six years, finance sector development, infrastructure (including railways) and electricity generation companies. Among IFC’s recent commitments includes $75 million financial support and mobilizing $200 million for the rehabilitation and upgrading of the railways concession and a $25 million loan to assist the expansion of Roofings Ltd, a steel coated zinc project at Namanve Industrial Park.
As of October 2013, MIGA had a portfolio of three guarantees with a combined gross exposure of $161 million. MIGA is supporting Globeleq Holdings (United Kingdom) with $41 million in guarantees covering its equity investment in the electricity distribution grid of Uganda. MIGA is also supporting Sithe Global (USA) with guarantees of $120 million covering its equity investment in Bujagali Energy Ltd.
Last Updated: Apr 09, 2015
Around The Bank Group
Find out what the Bank Group's branches are doing in Uganda.