Uganda’s economy registered steady growth in July 2025, demonstrating resilience amid shifting global dynamics and regional trade challenges.
According to the Ministry of Finance’s July economic performance report, the country’s key sectors showed significant signs of recovery, supported by rising export revenues, a stable inflation outlook, improved private sector activity, and a stronger Ugandan Shilling.
Despite facing pressure from a widening trade deficit and persistent external risks, Uganda’s overall economic momentum remains positive, reflecting sustained investor confidence and robust domestic demand.
Economic activity strengthened, with the Composite Index of Economic Activity rising to 181.03 in June 2025 from 179.14 in May, representing a growth rate of 1.1% compared to 0.3% recorded the previous month.
This improvement signals increasing productivity and consumption across various sectors, particularly agriculture, manufacturing, trade, and services. The private sector continued to drive this expansion, although rising production costs and regional trade barriers moderated overall performance.
The Purchasing Managers’ Index, a key measure of business activity, stood at 53.6 in July, slightly lower than 55.6 in June but still well above the 50-point threshold that separates growth from contraction.
The report highlights that most businesses remained optimistic about future prospects, citing strong consumer demand, an improving investment environment, and expanding export opportunities.
Inflationary pressures remained largely contained, providing relief to households and businesses. Annual headline inflation eased to 3.8% in July from 3.9% in June, supported by declining food prices and stable energy costs.
Food crop inflation dropped to 3.2% from 4.7%, reflecting improved agricultural supply and favorable weather conditions across key growing regions.
Energy, fuel, and utilities inflation remained unchanged at 0%, thanks to consistent fuel availability and government initiatives to stabilize electricity tariffs. Core inflation, which excludes food and energy, edged up slightly to 3.5% from 3.3%, indicating moderate price pressures in manufactured goods and services.
The stability in prices was further reinforced by a stronger Ugandan Shilling, which appreciated for the fourth consecutive month. The currency traded at an average mid-rate of UGX 3,586.57 per US dollar in July, up from UGX 3,605.84 in June.
This appreciation was attributed to strong foreign exchange inflows from offshore investors, higher remittances from the diaspora, and robust export earnings. The improved exchange rate eased import-related cost pressures, particularly for fuel, machinery, and industrial inputs, while boosting consumer purchasing power.
Uganda’s export sector delivered one of the strongest performances in recent years, helping to anchor economic growth. Merchandise export receipts rose significantly to USD 1.15 billion in June 2025, representing a 64.3% increase from USD 702.5 million in June 2024.
Coffee remained the country’s top export earner, with revenues surging by 78.4% due to increased production and higher global prices. Improved access to premium international markets, especially in Europe and Asia, contributed to this performance.
Other commodities such as fish, tea, flowers, and mineral products also recorded solid growth, supported by rising global demand and expanded production capacity.
Despite robust export performance, Uganda’s trade deficit widened, reflecting the economy’s growing reliance on imported goods and capital equipment. The trade gap reached USD 272.9 million in June 2025, up from USD 244.9 million in the same period last year.
Merchandise imports increased to USD 1.42 billion from USD 947.4 million, driven largely by higher private sector demand for machinery, vehicles, textiles, food products, and construction materials. While the increase in imports signals stronger domestic investment and consumption, it also underscores the need to diversify export earnings and reduce dependency on foreign goods.
Investor confidence remained solid, with the Business Tendency Index standing at 58.3 in July 2025, well above the neutral threshold of 50. This reflects strong optimism among businesses regarding future demand, profitability, and employment prospects. The survey indicated that companies expect improved access to financing, rising consumer purchasing power, and stable policy support to sustain growth in the months ahead.
Private sector credit continued to expand, rising by 1.6% from UGX 23.54 trillion in May to UGX 23.90 trillion in June. Lending activity increased across several sectors, including trade, agriculture, personal financing, manufacturing, and real estate development.
The report highlighted improved credit availability resulting from stable interest rates, increased liquidity in the financial sector, and strengthened confidence in economic prospects.
On the fiscal front, government operations remained broadly on track despite rising expenditure pressures. The fiscal balance posted a deficit of UGX 1.46 trillion in July, lower than the projected UGX 1.66 trillion, mainly due to stronger revenue performance and higher-than-expected inflows from development partners.
Total revenue and grants amounted to UGX 2.54 trillion, exceeding the monthly target of UGX 2.46 trillion. Tax collections performed well, achieving 99.3% of the set target, supported by improved compliance measures, expanded tax registration, and increased trade activity.
Regionally, Uganda maintained competitive price stability compared to its East African Community peers. At 3.8%, Uganda’s annual headline inflation was lower than Rwanda’s 7.2% and Kenya’s 4.1% but slightly higher than Tanzania’s 3.3%.
However, the country faces growing regional trade challenges. Uganda’s trade deficit with its EAC partners nearly doubled to USD 209.5 million in June 2025 from USD 107.5 million in May, largely due to rising imports and declining regional export receipts. Non-tariff barriers, tariff disputes, and restrictions on products such as fish, meat, tiles, and agricultural produce continued to limit Uganda’s competitiveness in regional markets.
The government is prioritizing policy interventions aimed at addressing these structural imbalances. Efforts are underway to expand value addition in agriculture, strengthen industrial processing capacity, and diversify export products beyond traditional commodities.
Investments in logistics infrastructure, trade facilitation, and cross-border partnerships are also expected to reduce transaction costs and improve competitiveness in both regional and global markets.
Looking ahead, Uganda’s economic outlook remains broadly positive, with several growth drivers expected to sustain momentum in the short to medium term. Strong export earnings, stable inflation, increased private investment, and continued public spending on infrastructure projects are likely to underpin growth.
Ongoing oil and gas developments, particularly the East African Crude Oil Pipeline and associated production facilities, are expected to stimulate activity in construction, logistics, and energy, further boosting GDP expansion.
Nonetheless, the economy faces risks that could slow its growth trajectory if not managed effectively. Rising global fuel prices, fluctuations in commodity markets, and heightened geopolitical tensions pose external challenges, while domestic pressures such as a widening trade deficit, climate-related disruptions, and limited industrial capacity require strategic policy responses.
Ensuring fiscal discipline, maintaining a stable monetary environment, and accelerating structural reforms will be essential in sustaining growth and protecting macroeconomic stability.
The private sector remains central to Uganda’s economic transformation. With increasing access to financing, a growing middle class, and supportive government policies, businesses are expected to drive industrialization, job creation, and innovation.
Expanding investments in technology, digital trade, and value-added manufacturing will play a critical role in enhancing competitiveness and reducing dependency on imports.
As Uganda works towards achieving its Vision 2040 goals and implementing the Fourth National Development Plan, policymakers continue to focus on fostering inclusive growth, expanding export markets, and enhancing regional integration.
With sustained policy support, rising investor confidence, and a favourable macroeconomic environment, the country is well-positioned to build on its recent gains and strengthen its role as a key economic player in East Africa.
