Can Uganda achieve $500B economy in a decade?

by Christopher Kiiza
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Government will soon finalise the strategy to expand Uganda’s GDP ten times from the current $50 billion (FY 2023/24) to US$ 500 billion within a decade, starting FY 2024/2025, driven by value addition and access to export markets, says President Museveni.

“That is what I have told the [Ministry of] finance people and the cabinet. The GDP of Uganda must be expanded ten times from the current 50 billion [dollars] financial year 2023/2024 to US dollars 500 billion within a decade, starting with the financial year 2024/2025 driven by the value addition and access to export markets,” Museveni said on Thursday.

He highlighted the East Asian tigers such as South Korea, Thailand, Malaysia, Singapore among others as references that have achieved this target.

These countries have exponentially grown their GDP to around and over US$500 billion from a base like Uganda’s.

 “South Korea: 46 years of growth at an average annual growth rate of 13% (from US$ 38.0 billion in 1977 to US$1,665 billion in 2023); Thailand: 38 years of growth at an average annual GDP growth rate of 7.6% (from US$ 38.9 billion in 1985 to US$ 500 billion in 2023); Malaysia: 34 years of growth at an average annual growth rate of 8% (from US$ 38.0 in 1989 to US$406 billion in 2023); Singapore: 33 years of growth at an average growth rate per annum of 8.7% (from US $36.1bn in 1990 to US$466.8 in 2023); and Chile: 33 years of growth at an average annual growth rate 4.5% (from US$33 billion in 1990 to US$316.7 billion in 2023),” he said.

These countries have demonstrated that the primary drivers of accelerated growth include; access to global markets with higher rates of growth of manufactured exports and their share of world exports of manufactured goods.

Others include; increased productivity across strategic sectors; specialization through skilled human capital that supported research and development which helped to achieve competitive advantages; and prudent economic policies that harnessed the comparative advantages.

This means that for Uganda to achieve its ambition, the country must acknowledge the significance of increasing the volume of and value of exports to the global market.

“For us to increase what we call export receipts, we need to promote both merchandise exports and services exports. But then, when we come to merchandise exports, we need to add value,” says Elly Twineyo, the Executive Director, Uganda Export Promotions Board.

Museveni said export receipts are expected to increase as Uganda accelerates the production of light manufactured goods and middle high-tech industrial products through value addition processes especially to the abundant mineral reserves that the country has.

Uganda Contributes Below 0.003% Of Global Exports

Despite registering a boost in exports, Uganda is still a tiny fish in the big global economic pond, making up less than 0.003% of the total global exports.

According to Uganda Bureau of Statistic (UBOS), in the twelve months to October 2022, Uganda’s merchandize exports increased significantly, growing by 54.9 percent from USD 4,194 million to USD 6,4978 million in the twelve months to October, 2023, largely driven by gold, coffee and maize exports. Imports grew by 26.2 percent, much slower than the growth in exports, resulting in the narrowing of the trade deficit by 11.2 percent in the same period.

Imports increased to USD 9,356.23 million in the 12 months to October 2023 compared to USD 7,412.71 million in the same period a year ago. The increase in imports is largely in the oil and gas sector, mineral exploration and development, vehicles and accessories.

The East African Community (EAC), as a single trade bloc, remained the major destination of Uganda’s exports in the 12 months to October 2023, accounting for 43.5 percent of total exports followed by the Middle East (18.1 percent) and Asia (17.6 percent).

Within the EAC region, the top three destinations for Uganda’s exports in the same period were Kenya (31.5 percent), Democratic Republic of the Congo (24.6 percent) and South Sudan (23.3 percent).

In the 12 months to October 2023, Uganda traded at a surplus worth USD 716 million with EAC Partner States. However, the trade balance with Kenya and Tanzania was a deficit, meaning Uganda imported more in terms of value from those countries, than exports to them.

In the 12 months to October 2023, Uganda exported goods worth US$ 890 million to Kenya, US$ 696 million to DR Congo, US$ 659million to South Sudan, US$ 298 million to Rwanda, US$ 213 million to Tanzania and US$ 72 million to Burundi.

In total, Uganda’s exports to the EAC, were worth USD 2,828 million out of a total export of 6,498 million to all its trading partners.

However, compared to the total global exports, Uganda’s exports make up a very tiny fraction of less than 0.003 percent.

President Museveni admits that Uganda must increase its volume of exports to accelerate its growth.

“So, to accelerate our prosperity, we must significantly increase the volume and value of our exports to the global market. Through increased trade, our goal of transitioning from poverty to prosperity, will be achieved much faster,” he said.

In the same period, Uganda recorded trade surpluses with the European Union and COMESA, of USD 113.36 million and USD 967.34 million, respectively.

Uganda’s exports to COMESA were worth US$ 2318 million, Middle East – US$ 1174 million, Asia – US$ 1144 million and European Union – US$ 860 million.

Trade deficits were recorded with Asia, and the Middle East of 2,786.57 million and 440.1 million, respectively, during the same period.

Economic Growth

Economic experts say that Uganda to expand its GDP to USD 500 billion by 2034 requires double digit growth of the country’s economy.

On the contrary, Uganda’s economy grew by 4.6 percent in the financial year 2021/22, and 5.2 percent in the financial year 2022/2023. The services sector grew at 6.2 percent (especially in trade, tourism, education, ICT, arts and entertainment); agriculture at 4.8 percent with food crops growing at 4.7 percent from 3.5 percent, livestock at 8.8 percent from 8.3 percent, and fish activities at 8.6 percent from 0.3 percent in FY2022/23 and FY2021/22, respectively. The growth in industry was 3.5 percent, slower than the 5.1 percent recorded in the same period the previous year.

To grow the economy to double digits and commit to achieve the ambition, government must ensure increase in international trade and export promotion because expanding international trade and promoting exports are key strategies for countries seeking to increase their economic output and attract foreign investment, build capacity of producers and exporters, improve infrastructure, and invest in technology and innovation.

Museveni said that Government is reducing further the cost of electricity for manufacturers, improving transport infrastructure including roads and railways, eliminating bureaucracy in Government especially in procurement in order to attract new investments and technology transfer, making available affordable capital and intensifying the fight against corruption, through accelerating automation of Government processes, frequent audits of Government interventions and rationalization of Government institutions and departments.

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