Despite ongoing global challenges and geopolitical tensions, economic activity in Uganda has remained robust. According to a new World Bank report, real gross domestic product (GDP) grew by 6.1% in fiscal year 2023/2024 on top of 5.3% growth registered a year before. This growth has been broad-based with significant contributions from the service sector, particularly tourism, as well as the industrial sector including manufacturing and construction.
The 24th edition of the Uganda Economic Update released today shows that headline inflation in Uganda has decreased considerably. It dropped to 3.2% on average in fiscal year 2023/2024 from 8.8% in the previous fiscal year, remaining below the central bank target of 5%. The decline was driven by the fading impact of some global economic shocks, including significant reduction in global food and energy prices. This was further supported by a tight monetary policy along with continued fiscal consolidation and a stable foreign exchange rate regime. This trend places Uganda among the East African countries with the lowest inflation rates over the past fiscal year.
The economic update projects GDP to grow modestly to 6.2% in the fiscal year 2024/2025. If oil production begins on schedule and reaches peak production of 230,000 barrels per day, it will significantly boost growth in the medium term. However, potential delays in oil production pose a serious risk to this outlook. Inflation is likely to remain close to the central bank target yet vulnerable to commodity price volatility, weather conditions, and exchange rate depreciation. Besides, public debt is projected to increase slightly to 52% of GDP due to election-related spending as the country heads to the polls early in 2026.
“Therefore, increasing efforts to raise more revenue domestically remains important because it will enhance Uganda’s ability to spend on priority infrastructure such as transport and energy as well on social sectors,” said Saadia Refaqat, World Bank Senior Economist and lead author of the Uganda Economic Update. “The government can, among others, manage tax exemptions effectively and improve the efficiency of the tax system; provide capacity-building initiatives for small businesses and establish a taxpayer education unit at Uganda Revenue Authority to enhance public understanding of tax policies; and increase enforcement to ensure digital companies comply with VAT requirements.”
More money and prudent expenditure will allow the government room to spend more on human capital — the knowledge, skills, and physical health that enable people to be productive — in areas such as Early Childhood Development (ECD). Quality human capital leads to improved educational outcomes, better health, and increased productivity. The 24th edition of the Uganda Economic Update focuses on the critical role of public and private investment in ECD as it is essential in harnessing Uganda’s demographic dividend through its young population.
“By investing in early childhood development, a nation can ensure that children receive the essential nutrition, healthcare, and education required to become healthy, skilled, and productive adults,” said Mukami Kariuki, World Bank Country Manager for Uganda. “These individuals can then enter the workforce prepared to drive productivity, foster innovation, and accelerate economic growth. The World Bank is supportive of Uganda’s efforts to transform its young people into a valuable economic asset by investing in their future productivity today.”
Consequently, the economic update identifies four key ECD investment priorities in the near term: 1) expanding primary health care facilities and community hospitals in underserved areas of the country; 2) introducing one year of quality, publicly financed pre-primary education through government schools in line with the new Early Childhood Care and Education Policy; 3) developing affordable models of childcare that prioritize women in the informal sector, and particularly those with children under three years of age; and 4) scaling up of promising parenting support programs.
Distributed by APO Group on behalf of The World Bank Group.
