Uganda’s economy is proving to be a beacon of hope amidst global uncertainty. According to the World Bank Group, the country’s economic activity remains robust, with a projected GDP growth of 6.2% in the fiscal year 2024/2025. This is a remarkable feat, considering the ongoing global challenges and geopolitical tensions.
The World Bank attributes this resilience to favourable weather conditions, investments in the oil sector, and progress on implementation of the Parish Development Model (PDM). The PDM has already shown impressive results, with over 10,000 savings and credit cooperatives established and capitalized, and nearly $240 million in loans disbursed to households.
However, there are potential risks on the horizon. Delays in oil production could significantly impact economic growth, and inflation remains vulnerable to commodity price volatility, weather conditions, and exchange rate depreciation.
“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,” the World Bank noted
Public debt is also projected to increase slightly to 52% of GDP due to election-related spending.
To address these challenges, the World Bank emphasizes the importance of increasing domestic revenue mobilization. This can be achieved by managing tax exemptions effectively, improving the efficiency of the tax system, and providing capacity-building initiatives for small businesses.
Mr Saadia Refaqat, World Bank Senior Economist, speaking at the presentation of Uganda’s economic update in Kampala on Monday, emphasised the importance of increasing domestic revenue mobilisation.
“The government can manage tax exemptions effectively, improve the efficiency of the tax system, and provide capacity-building initiatives for small businesses,” he said. “Additionally, the government can 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.”
Investing in Early Childhood Development (ECD) is also critical to harnessing Uganda’s demographic dividend. By investing in ECD, Uganda can ensure that its children receive the essential nutrition, healthcare, and education required to become healthy, skilled, and productive adults. This, in turn, can drive productivity, foster innovation, and accelerate economic growth.
The World Bank has identified four key ECD investment priorities, including:
- Expanding primary healthcare facilities: to provide essential healthcare services to children and families.
- Introducing quality pre-primary education: to provide children with a solid foundation for future learning.
- Developing affordable childcare models: to support working parents and caregivers.
- Scaling up parenting support programs: to provide parents and caregivers with the skills and knowledge they need to support their children’s development.
State Minister for Finance General Duties, Henry Musasizi, noted that Uganda’s economy has fully recovered from various shocks, including the Covid-19 pandemic.
“The experience of Covid-19 strengthened our health system, and suspension of new funding from the World Bank has helped to reinforce our resolve to boost our domestic revenue mobilization, and to diversify our export markets,” he said. “The government is implementing fiscal efficiency measures through our fiscal consolidation agenda, and boosted revenue collection as well as borrowing for strategic projects that will accelerate economic growth and socio-economic transformation.”