The World Bank in Uganda

The Ugandan economy grew at 4.6% during FY22, faster than had been anticipated due to an uptick in activity after the economy reopened in January 2022. On the supply side, services and industry were the main drivers of economic growth. There was also strong recovery in wholesale and retail trade, real estate and education, with industry rebounding through construction and manufacturing. On the demand side, private investment and private consumption headed towards pre-COVID levels. The current account deficit widened to over 9% of GDP, primarily reflecting a deterioration in the terms of trade and wider trade deficit.

With higher prices and policy tightening, growth in real consumption slowed, possibly because of reduced purchasing power, limited credit growth, and job losses. Employment fell after the second lockdown in June 2021 and remained at the same level in June/July 2022. Half of the population was moderately food insecure. Households, in particular the poorest ones, felt a negative impact from increased prices, either by being unable to access food products or to buy them in desired amounts. 

The rate of economic growth could rise to over 6% in the medium-term despite sustained commodity price-driven inflation pressures, gradual fiscal consolidation, and tighter monetary policy. Growth will benefit from a gradual increase in investments in the oil sector and any dividends from the Ugandan government’s promotion efforts for tourism, export diversification, and agro-industrialization. The slowdown of global growth and heightened tightening of global financial conditions pose major risks to Uganda’s growth, however. Accelerated growth may reduce poverty (measured at the $1.90 line) slightly to 41.9% by 2024, but this will depend on how COVID-19 evolves, how long Russia’s invasion of Ukraine and related sanctions continue, the pace of food inflation, and any environmental shocks that adversely affect households due to their limited adaptive capacity.

Development Challenges

Compared to its 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 country’s high population growth rate of 3%. As a result, in the five years prior to the COVID-19 crisis, per capita real GDP growth halved to 1.1% on average per year.

Structural transformation is essential to reinvigorate economic activity and reduce poverty. Uganda’s growth model of debt-financed public spending—which emphasizes infrastructure and has crowded out private sector borrowing —is not sustainable. The state should instead support the economy through investments in human capital, through regulations that facilitate investment and job-creation, and through measures to reduce inequality and strengthen resilience.  The prospects for this shift to a private sector-led growth model will also rely on maintaining macroeconomic stability and better support for the vulnerable, farmers, and small enterprises; increasing the uptake of digital technologies; and the effective use of public resources.

Human Capital

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 her 18^th birthday, compared to the Sub-Saharan average of 8.3. However, her actual years of learning are 4.3, with 2.5 years considered “wasted” due to the poor quality of education.

Last Updated: Oct 05, 2022

World Bank Group (WBG) Engagement

The World Bank Group is developing 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 Country Partnership Framework FY16-FY21, extended through the Performance and Learning Review to FY22, the new CPF is being prepared in close collaboration with the government. It will be informed by consultations with some of the members of civil society, the 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 that ended June 30, 2022, the approved rate was 0%. Loan repayments are stretched over 38 years, including a six-year grace period.

As of June 30, 2022, the World Bank’s portfolio of IDA-financed credits and grants stood at $5.6 billion in commitments, comprising 24 national and 4 regional projects. 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, ICT, trade and services, and agriculture. The urban sector dominates the portfolio with a share of 25%, followed by energy at 15%. The portfolio also includes $755 million (most of which is in grant form) from the Window for Host Communities and Refugees focused on supporting the implementation of Uganda’s integrative refugee policies.

The International Finance Corporation’s (IFC) committed investment and advisory portfolio in Uganda stood at $170.6 million as of June 2022, mainly in infrastructure, agribusiness, health, and education. In addition, IFC has worked closely with the World Bank and the 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 July 31, 2022, MIGA’s portfolio has a combined gross exposure of $463.8 million, supporting reliable and accessible electricity and the finance sector. This includes:

• Coverage of The Rise Fund’s equity investment in the mobile money and digital financial services companies operating under the Airtel Money brand.
• Coverage of the acquisition of the Bujagali hydropower project 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:

• Generating Growth Opportunities and Productivity for Women Enterprises Project ($217 million), approved on June 17, 2022, aims to increase access to entrepreneurial services that enable female entrepreneurs to grow their enterprises in targeted locations, including host and refugee communities.
• Greater Kampala Metropolitan Area Urban Development Program ($566 million), approved on May 31, 2022, aims to improve the institutional capacity in the Greater Kampala Metropolitan Area (GKMA) for metropolitan coordination and management, and to increase access to improved infrastructure and services.

Last Updated: Oct 05, 2022

The Uganda Skills Development Project is expanding opportunities for the development of skills that are market- and enterprise-driven, including in the informal sector.

• More than 82,000 youth (47% female) have benefited from the industry and enterprise-based training so far for both the formal and informal sectors.
• Standards have been set for 25 new occupational curriculum and assessments in key trades and occupations, aligned with priority sectors such as agro-processing, manufacturing, construction, transport/logistics, ICT, and hospitality. The occupational standards ensure that the skills provided are in keeping with labor market demands.

Through the Uganda Teacher and School Effectiveness Project:

• More than 17,000 primary (elementary) education teachers have been trained in early grade reading and 12,198 schools have received 13 million math and English textbooks, helping to improve 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 is in place, with supporting documents. Early Childhood Education caregivers from 1,500 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 the 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

The World Bank’s $355 million energy portfolio (Energy for Rural Transformation III) focuses on transmission and distribution, and has resulted in the following:

• 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

The Albertine Region Sustainable Development Project is financing the upgrading of approximately 100 kilometers of road from Kyenjojo to Fort Portal-Mubende-Kampala through Kagadi town to Kabwoya town, which forms part of the 238km Kyenjojo-Hoima-Masindi-Kigumba road connecting the districts of Kyenjojo, Kibaale, Hoima, Masindi, and Kiryandongo in Western Uganda. These are towns that fall within the oil-rich Albertine region.

Because of the road project, one significant sign of growth in Kagadi District, according to the area commercial officer, is the increase in collections from trading license fees, which grew by 19% from Ush112 million in FY20/21 to USh134 million in FY21/22.

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 the 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 improved through training programs to facilitate job creation and trade.

Last Updated: Oct 05, 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: Oct 11, 2022