Economic Overview

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.

Political Context
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.

Development Challenges

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

Development Strategy

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. 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 second NDP for the period FY16-FY20 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 Assistance Strategy (CAS) FY11-15, which is anchored in the government’s first NDP. The CAS hinges on four pillars: Promote inclusive and sustainable economic growth; Enhance public infrastructure, Promote human capital development, and Good governance and value for money. The CAS Progress Report (CASPR) in July 2013 while acknowledging the priorities of the CAS remained valid, proposed three key adjustments in view of the changing context to help restore the path for faster economic growth and improve the governance environment: (i) More emphasis on transformational operations – infrastructure (energy and transport), agricultural productivity (including agro-based industries) and access to markets, skills development that leads to more jobs (including developing the oil producing region as a growth pole) and expectations management in the oil region; (ii): Selective use of development policy lending in exceptional cases to support governance or sectoral reforms; (iii): Broadening support to the country’s governance efforts while recognizing the limits of technical interventions with support to both supply-side and demand-side programs.. The Bank is currently preparing a Systematic Country Diagnostics (SCD) for Uganda, which will inform the next Country Partnership Framework (CPF), to guide the Bank’s engagement when the CAS ends by end-2015.

Last Updated: Oct 01, 2015

Through the 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.

The Private Sector Competitiveness Project II facilitated the recruitment of a secretariat to support the Business Licensing reform work under the International Finance Corporate (IFC) Uganda Investment Climate Program. Key results achieved include: Reduction in time taken to obtain a trading license from 15 to four days and reduction of fees by 25% across all segments of businesses. This reform benefitted over 501,000 and led to annual private sector cost savings in excess of $2.5m. Of 766 licenses issued by central and local governments, 41 redundant/obsolete licenses were eliminated, 294 simplified; eight amalgamated into four, and five reclassified through a Cabinet Instrument, leading to annual private sector cost savings in excess of $53.2m. To ensure full implementation of agreed reforms and realize impact through full automation of the business licensing and business registration processes, the World Bank Group (WBG) is supporting a $10m component under the $100m WBG lending operation to the government.

Through the Health Systems Strengthening Project, 230 health facilities have received functional medical equipment, procured 19 ambulances, and trained over 800 health workers in different fields. 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.

The East Africa Public Health Laboratory Project supported the Uganda National Tuberculosis Reference Laboratory to reach the gold standard ISO accreditation, and quality 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.

The Northern Uganda Social Action Fund, a community-driven development project, started in 2003 and is now going into its third phase. NUSAF 1 contributed to significantly enhancing the capacities of communities in the region by making local governments more accountable to community demands and improving service delivery. NUSAF2 contributed to addressing the widespread poverty, vulnerability and service delivery challenges in Northern Uganda.

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.

Last Updated: Oct 01, 2015

The International Finance Corporation (IFC)

IFC has approved funding for more than 50 projects in Uganda amounting to $1.5 billion, focusing on: i) improving the investment climate; ii) building the capacity of Small and Medium Enterprises (SMEs) and micro-enterprises and the institutions that can support them, and iii) providing proactive support to project development in the areas of finance, agribusiness, and infrastructure.

IFC’s recent commitments include $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.

In the oil sector, IFC signed an advisory mandate to provide advice on the project’s environmental and social impact assessment and risk management to Lake Albert Development (LAD) partners. IFC will support midstream and downstream opportunities such as the export pipeline, refinery and thermal power generation as well potential projects in related areas such as chemicals and fertilizers.

 Multilateral Investment Guarantee Agency (MIGA)

As of October 2014, 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: Oct 01, 2015


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

*Amounts include IBRD and IDA commitments