The World Bank in Uganda

 Economic Overview

Uganda’s economy rebounded strongly as domestic economic conditions improved following the easing of mobility restrictions during the period October 2021–February 2022. The third wave of COVID-19 infections was also milder and is now over. With about 30 percent of the 22 million target population (aged 18+) fully vaccinated by late February, the objective of fully vaccinating 49 percent of the population will likely be reached by June 2022. The war in Ukraine and resulting economic sanctions are mainly affecting Uganda through commodity prices, which were already on the rise. Real GDP growth could fall below the recovery path that had been expected, to average 4.7 percent in FY22.

With lower consumption growth due to reduced remittances, limited credit, and job losses, poverty increased from 27.5 to 32.7 percent after the first lockdown in 2020. Employment rates fell again after the second lockdown in 2021. 

Given a more positive COVID-19 and vaccine outlook, and the recent signing of the final investment decision in the oil sector, the economy was expected to continue gaining buoyancy. However, risks are tilted downwards. The worsening global environment, following Russia’s invasion of Ukraine, may reduce Uganda’s growth to below 6 percent in FY23 and FY24 because of trade disruptions, higher commodity prices, and increased risk aversion that may slow investments. Costlier inputs (e.g., fertilizers and transport) will also pose challenges for agricultural production, food security, and household incomes that are still recovering. 

Development Challenges

Compared to the strong performance in the 2000s, recent economic growth has slowed considerably. With reduced reform momentum, a less supportive external environment, and other exogenous shocks like droughts, growth since 2011 has barely surpassed the high population growth rate of 3 percent. As a result, in the five years prior to the COVID-19 crisis, per capita real GDP growth halved to 1.1 percent on average per year.

Structural transformation is key for growth and poverty reduction. This will require changing the growth model and role of the state. The current model of debt-financed public spending – which emphasizes infrastructure and has crowded out private sector borrowing – needs to be replaced with one where the private sector drives growth. The state can then provide support through a better balance of investments in human capital and infrastructure. The prospects for this shift will also rely on maintaining macroeconomic stability; better support for the vulnerable, farmers, and small enterprises; increasing uptake of digital technologies; and effective use of public resources.

Human Capital in Uganda 

Uganda’s Human Capital Index (HCI) is low; a child born in Uganda today is likely to be 38% as productive when she grows up, as she could be if she enjoyed complete education and full health. A child who starts schooling at the age of 4 is only expected to complete 6.8 years of school by their 18^th birthday, compared to the Sub-Saharan average of 8.3. However, actual years of learning are 4.3, with the 2.5 years considered “wasted” due to poor quality of education.

Last Updated: Apr 17, 2022

The World Bank Group is embarking on development of a new Country Partnership Framework (CPF) to support the Government of Uganda’s vision of a society transformed from a peasant economy to a modern, prosperous country by 2040. Like the previous one (Country Partnership Framework FY16-FY21) — extended through the Performance and Learning Review to FY22 — the new CPF will be prepared in close collaboration with the government. It will be informed by consultations with civil society, private sector, academia, development partners, and the public that guided review of the Systematic Country Diagnostic.

The investment portfolio in Uganda is primarily financed by the International Development Association (IDA), which provides interest-free credits and grants on concessional terms —attracting only a service charge of 0.75% on the disbursed credit amount and a commitment charge of up to 0.5% on the undisbursed amount. The commitment charge is decided annually by the IDA Board of Directors. For the fiscal year ending June 30, 2022, the approved rate is 0%. Loan repayments are stretched over 38 years, including a six-year grace period.

As of March 31, 2022, the World Bank’s portfolio of IDA-financed credits and grants stood at $4.8 billion in commitment, comprising 22 national and 5 regional operations. Urban and energy sectors dominate the portfolio with a share of 17% each. The portfolio is complemented by trust fund resources, knowledge products and technical assistance and is spread across various sectors including water, social protection, energy, health, education, and agriculture. The portfolio also includes a significant commitment from the Window for Host Communities and Refugees largely in grants to support Uganda sustain its progressive refugee policy.

As of June 2021, the International Finance Corporation (IFC) had commitments totaling  $282.1 million mainly in infrastructure, the financial market, agribusiness, education, and energy. The IFC has worked closely with the World Bank and Multilateral Investment Guarantee Agency (MIGA) on private power generation and distribution projects and continues to collaborate closely within the World Bank Group on renewable energy.

As of February 2022, MIGA’s portfolio has a combined gross exposure of $425 million, supporting reliable and accessible electricity and the finance sector. This includes:

• Coverage of the acquisition of the Bujagali HPP to support incoming investors.
•  Capital optimization of an international bank to provide headroom for lending operations in Uganda.
• Support to the first Regional Development Bank, TDB, of which Uganda is a member.

Recently approved IDA projects include:

• Electricity Access Scale-up Project ($568 million), approved on March 31, 2022, aims to increase access to energy for households, commercial enterprises, industrial parks, and public institutions.
• Investment for Industrial Transformation and Employment ($200 million), approved on December 20, 2021, aims to mitigate the effect of COVID-19 on private sector investment and employment and to support new economic opportunities including in refugee and hosting communities.
• Additional Financing to Uganda COVID-19 Response and Emergency Preparedness Project ($164.3 million), approved on December 16, 2021, aims to prevent, detect and respond to COVID-19 and strengthen national systems for public health emergency preparedness in Uganda.

Last Updated: Apr 17, 2022

COVID-19 Vaccine Rollout

The World Bank is contributing to Uganda’s COVID-19 vaccination efforts by providing $137 million to buy vaccines and support vaccine deployment including vaccine delivery and immunization; risk communication and community sensitization; strengthening supportive supervision; enhancing reporting and immunization data management; payment of hazard allowances to eligible health workers; and strengthening pharmacovigilance to address adverse events following immunization.

Human Capital

Through the Uganda Teacher and School Effectiveness Project:

• More than 17,000 primary education teachers have been trained in early grade reading and 12,198 schools have received 13 million math and English textbooks, which is improving the pupil-textbook ratio and learning outcomes.
• About 24% of pupils can read 20 or more words per minute compared to 1% in 2016. An e-inspection system is in place, monitoring more than 1,000 schools. 
• A draft Early Childhood Development Policy (and supporting documents) is in place, and Early Childhood Education caregivers from 1,500 early childhood centers have been trained and are providing care to 82,620 pupils across the country. 
• A total of 929 classrooms have been constructed, benefiting 55,200 pupils.

The Uganda Multi-Sectoral Food Security and Nutrition Project:

• Has helped establish demonstration gardens in 1,000 government-aided primary schools to promote production and consumption of micronutrient-rich foods and the use of community-based nutrition services. The gardens grow high-iron beans, orange-fleshed sweet potatoes, and a variety of indigenous vegetables.
• Another 2,000 demonstration gardens for lead farmers were established in surrounding communities, where the beneficiary schools were established.

Through the Health Systems Strengthening Project:

• As many as 230 health facilities countrywide have received medical equipment.
• The Health Service Commission has set up an e-recruitment job bureau. 
• Nine regional referral hospitals have been renovated across Uganda.
• Scholarships have been provided to 797 health workers, with most of the beneficiaries pursuing diplomas, and more than 400 already having completed their studies.

Energy

Energy for Rural Transformation III: The World Bank’s $355 million energy portfolio focuses on transmission and distribution.

• A 220KV transmission line from Kawanda-Masaka has been completed and will serve Masaka, Mbarara, Kasese, Fort Portal, Kabale and Bushenyi and surrounding areas. The line is expected to supply at least 50% of health centers not connected to national hydroelectricity or solar power.
• The 250 MW Bujagali Hydroelectric project remains a main source of power to the country and represents the first-ever joint World Bank Group project, financed by an International Development Association (IDA) Partial Risk Guarantee for a syndicated commercial loan of $115 million, International Finance Corporation (IFC) loans of $130 million, and a Multilateral Investment Guarantee Agency (MIGA) guarantee of $115 million.

Infrastructure

Through the Uganda Support for Municipal Development Project (USMID), all 14 municipalities have been supported to develop modern infrastructure, including roads and street furniture; solid waste management; and the development of markets and urban transport facilities. Local government officials have also improved management and administration, including physical planning and urban development, own source revenue, and procurement and contract management.

The Regional Communications Infrastructure Program has helped reduce the cost of internet access from $300 to $70 per Mbps, which has increased the use of digital platforms, greatly improving the efficiency of day-to-day government operations through shared infrastructure for data storage and service delivery. Information and communications technology skills have also been enhanced through training programs to facilitate job creation and trade.

Last Updated: Apr 17, 2022

The Bank is a co-chair and secretariat of the Local Development Partner’s Group (LDPG). Following measures to curtail COVID-19 in Uganda, the LDPG shifted to a virtual format focused on time-critical points, and ensuring collective efforts consider all aspects of the impact. They hold joint LDPG-government virtual meetings, to ensure a continuation of the partnership dialogue and to maximize support in a coordinated manner.

Supported by the technical working groups under the LDPG, and in close consultation with the respective government counterparts, partners are in the process of developing a comprehensive analysis including impact and government/development partners’ responses to COVID-19 in health, macro-economics, and refugees.

Last Updated: Apr 17, 2022