Government has laid out a strategy for the financial year 2025/2026 under the theme, “Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding and Broadening Services, Digital Transformation and Market Access.”
The next financial year will be the first year of commencement of implementation of Uganda’s tenfold growth strategy of expanding the economy from the baseline GDP of about USD 50 billion in FY 2022/23 to USD 500 billion in the next 15 years.
The implication of growing the economy tenfold means shifting the economic growth rate to a higher trajectory, to an average real economic growth rate of about 8% per annum; more than doubling the size of the economy (GDP) every 5 years for the next 15 years; raising per capita GDP six-fold from the current USD 1,146 to about USD 7,000 in 2040; doubling the level of savings in the economy from 20 percent of GDP to 40 percent of GDP in 2040 to match the required level of investment; raise the share of exports in GDP from 15 percent in FY 2022/23 to 50 percent, and the share of manufactured products in merchandise exports from 13 percent to 50 percent; and medium high-tech exports from 21 percent to 50 percent by 2040; and increase the annual FDI inflows from USD 3.01 billion as at April 2024 (driven by investments in oil and gas) to USD 50 billion by 2040.
Finance Minister, Matia Kasaija explains that the next fiscal year’s strategic policy direction will be among others; prioritizing the first phase accelerator actions of the ten-fold growth strategy anchored on the four key growth areas underpinned by the goal of full monetization and formalization of the economy.
The four key growth areas include: Agro-Industrialization, Tourism Development, Mineral-based Industrial Development including Oil and Gas, and Science, Technology and Innovation.
Under the four key growth areas, government will focus on fully commercializing and formalizing farming as well as undertaking strategic value addition for export; increasing tourist arrivals by five-fold under the current spend-per-tourist and length-of-stay; undertaking quantification of mapped mineral deposits and their governance regime and delivering of first oil as we prepare for commercializing operations of the petrochemical industry; and fast-tracking commercialization of on-going innovations in pathogen control and management for vaccines, diagnostics and therapeutics.
The 2025/26 financial year will also be the first year of major implementation of Rationalization of Public Expenditure (RAPEX) reform; and a year for consolidating the gains from implementing the fiscal consolidation strategy which is intended to enhance revenue collection, limit borrowing for only critical and strategic investments and control government expenditure.
How Feasible is the Tenfold Growth Strategy?
Uganda’s ambitious plan to expand its GDP to USD 500 billion in the next 15 years is a vision that will put the country’s potential to test.
The government’s focus on tourism development is particularly noteworthy, given the sector’s remarkable resilience in bouncing back from the adverse effects of COVID-19 pandemic which brought the sector to its knees.
According to the tourism industry performance report 2023, released by the Ministry of Tourism, Wildlife and Antiquities in March 2024, Uganda’s tourism sector demonstrated remarkable resilience in 2023.
International tourist arrivals reached 1,274,210 visitors in 2023, up 56.5 percent from 2022 (814,508).
Despite the challenges posed by COVID-19 pandemic, the country’s international tourism recovered 82.6% of the pre-pandemic levels (-17.4% versus pre pandemic year 2019).
This means that 82.6% of international tourists that visited Uganda in 2019 have returned.
Total recovery is projected to be achieved by the end of 2024.
Regarding mineral based industrialization, Uganda is rich in essential mineral resources that could drive its transition to a green economy.
The country possesses large deposits of gold, uranium, limestone, marble, graphite, iron, copper, and cobalt, among others.
While these minerals significantly boosted Uganda’s economy in the 1950s and 1960s, contributing up to 35% of export earnings, the mining sector’s contribution has now dropped to below 3%.
In 2021, the sector accounted for 2.3% of Uganda’s GDP, according to the Ministry of Finance.
To further ensure the realization of the growth of Uganda’s economy tenfold, the government is implementing a program-based budget aiming at full monetization of Uganda’s economy through commercial agriculture, industrialization, expanding and broadening services, digital transformation, and market access.
The budget prioritizes investment in the people of Uganda through human capital development, peace and security, construction of the standard gauge railway and meter gauge railway, investing in wealth creation initiatives, such as the parish development model, Emyooga, agriculture credit facility, maintenance of the existing infrastructure among others.
The Uganda government’s ambitious plan to expand the country’s GDP tenfold to USD 500 billion within a decade is a lofty goal that requires careful planning and a lot of hard work.
The country’s current infrastructure, including transportation networks, energy supply, and internet connectivity, may not be sufficient to support such rapid growth. Significant investments in infrastructure development are necessary to create an enabling environment for businesses to thrive.
Additionally, the country’s human capital needs to be developed to match the demands of these growth drivers. Education and training programs need to focus on skills development in areas such as technology, innovation, and industrialization.
Economic experts say that Uganda to expand its GDP to USD 500 billion by 2034 requires double digit growth of the country’s economy.
Financing Plan for the FY 2025/2026
“We shall finance the budget for FY 2025/2026 using our domestic resources as well as external resources. However, as I already indicated, external financing has been on the decline and this calls for strengthening the implementation mechanisms of our Domestic Revenue Mobilization Strategy,” said Kasaija.
In this regard, Kasaija said the government shall repurpose the resources in the current budget and improve allocative efficiency, to focus on the prioritized sectors of the economy (in the context of
fiscal consolidation, greater accountability for tax expenditures, and improving return on public investments).
He added that the government shall undertake effective implementation of the domestic revenue mobilization strategy with a major focus on combating tax evasion and smuggling, incentivize diversification of private capital to balance government securities vis-à-vis other forms of private finance, e.g. equities, further exploration of Oil & Gas reserves to increase revenue that can finance other sectors of the economy, attracting more Foreign Direct Investment (FDI) among others.
Performance of the Economy
Kasaija said Uganda’s economy has fully recovered from various shocks.
“In the last quarter of FY 2023/24, GDP growth was recorded at 6.7% and at the end of the financial year, it grew at 6% up from an average of 4.1% for the period FY2019/20 to FY2022/23. The growth rate of GDP had reduced to 3.0% in FY2019/20, having fallen from 6.4% in FY2018/19 due to the effects of COVID-19,” he said while presenting the budget strategy for financial year 2025/2026 at Speke Resort Munyonyo on Wednesday.
He added: “Uganda’s economy has strongly recovered and remains buoyant. In nominal terms, the size of the economy increased from Shs. 183 trillion (US$48.8 billion) registered in FY 2022/23 to about Shs. 202.13 trillion (US$ 53.2 billion) in FY 2023/24.”
Furthermore, Kasaija said that the other indicators of economic health also look quite good:
“At 3.5% in August 2024, inflation has been contained within the target rate. The shilling has remained relatively stable, for example, appreciating against the US Dollar by 1.1% in July 2024 despite other previous depreciation pressures at the beginning of this year. All the currencies of the EAC Partner States depreciated against the US Dollar in July 2024, except for the Ugandan Shilling. The Tanzanian and Kenyan Shillings depreciated by 1.2% and 0.5% respectively, while the Rwandan and Burundian Francs weakened by 0.5% and 0.2% respectively.”
“Interest rates have remained broadly stable, with the Central Bank Rate reducing by 250 basis points to 10%. Commercial bank lending rates for Shilling denominated credit averaged at 17.89% for the year ending June 2024, down from the 18.56% average recorded in FY 2022/23. This decline was partly due to a reduction in risk aversiveness of commercial banks following continued improvement in economic activity,” said Kasaija.
Uganda’s exports have increased to over USD 7.5 billion, up from USD 4.9 billion in 2023. The country traded at a surplus of USD 45.26 million with the rest of the EAC Partner States in June 2024, a shift from the deficit of USD 72.20 million registered the previous month.
Foreign Direct Investment (FDI) inflow to Uganda has boomed to USD 3.01 billion in April 2024 mainly driven by investments in oil and gas.
Uganda’s public debt, Kasaija said, remains sustainable on account of continued commitment to the implementation of the government’s fiscal consolidation agenda and sustained growth of the economy.
The nominal debt-to-GDP ratio recorded at end June 2023 was 46.9 percent.
Economic Outlook
According to the Ministry of Finance, the economy is projected to grow at 6.4 percent by the end of this financial year.
This growth is based on allocation of resources to the various areas that government considers critical, such as roads and bridges maintenance, rehabilitation of the Meter Gauge Railway and construction of the Standard Gauge Railway and water transport; electricity, with focus on enhancing transmission; wealth creation initiatives like PDM, Emyooga, ACF, Microfinance Support Center etc.; Science, Technology and Innovation including ICT (the Knowledge Economy); investing in the people of Uganda through Human Capital Development, including; health, education, provision of clean water for human consumption and for production; creative industry and social protection; and management of natural disasters, and regional and international commitments.
“The implication of these interventions is that Uganda’s overall GDP will expand from Shs. 224.204 trillion (equivalent to USD 57.5 Billion) and equivalent to US$163.3 Billion in Purchasing Power Parity (PPP) terms in FY 2024/25 to Shs 250.871 trillion (equivalent to USD 63.6 Billion), translating to USD180.8 Billion in Purchasing Power Parity (PPP) terms in FY2025/26. This demonstrates a strong growth path, from USD1,198.6 income per capita by end of FY 2024/25 to USD1,287.9 as income per capita for FY 2025/26,” Kasaija said.