Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Uganda boasts a market-based economy rich in natural resources and one of the fastest growing and youngest populations in the world. With comparative advantages in agriculture and estimated recoverable oil reserves of over 1.4 billion barrels, with first oil expected in 2025, Uganda is seeing increasing interest among foreign investors.
Uganda only fully reopened its economy in January 2022 after almost two years of partial and full COVID-19 related lockdowns. The strict restrictions, including a 7pm curfew and the closure of public schools, severely affected the economy. In the fiscal year (FY) 2021/22 (July 1- June 30), Uganda’s economy grew by 3.8%. Prior to the pandemic, Uganda’s growth for the previous five years (FY 2013/14 to 2018/19) averaged 5.3%, according to The Uganda Bureau of Statistics (UBOS). The slight economic recovery from 3.5% in FY 2020/21 was in part due to the reopening of the economy but also lower than the 4.3% earlier projected. The rise in commodity and fuel prices and depreciation of the Uganda Shilling against the dollar contributed to 6.3% annual headline inflation and 13% food inflation as of May 2022, according to UBOS.
With a total GDP of $45.7 billion in FY 2021/22, the industrial sector, which comprised 26.8% of the economy, was a primary driver of growth (5.3%). The agriculture sector, which employs 68% of the workforce and represents 24.1% of GDP, grew by 4.3% in FY 2021/22. The agriculture sector is primarily based on subsistence or smallholder production. According to the World Bank, about 41.1% or 16.9 million of Uganda’s population live below the poverty line of $1.90 per day. Uganda plans to spend a total of $12.8 billion in FY 2022/2023, an estimated 7.6% higher than the FY 2021/2022 budget. The increase is primarily due to increased spending in education, petroleum development, and a flagship poverty reduction program, called the Parish Development Model (PDM).
Uganda’s debt-to-GDP ratio increased to 49.7% in December 2021 (latest data available) as the Ugandan government increasingly turned to domestic borrowing and experienced lower than projected tax collection. In June 2022, the International Monetary Fund (IMF) estimated that Uganda’s debt to GDP would peak at 53.2% in FY 2021/22, exceeding the Ugandan government’s generally accepted risk threshold of 50%.
Additional statistics on Uganda’s economy and budget are available from the sources linked below:
National Budget 2021/22 - Uganda at https://www.budget.go.ug/library/597
Uganda maintains a liberal trade and foreign exchange regime. Nonetheless, endemic corruption, financial mismanagement, an onerous tax regime, and increasing political repression raise questions about the government’s commitment to fostering a stable and investor-friendly environment. Mid-to-long-term political uncertainty also increases risks to foreign businesses and investors. Seventy-six-year-old incumbent President Yoweri Museveni has been in power since 1986. The ruling National Resistance Movement changed the constitution in 2017 to enable Museveni to contest and then win a sixth term in 2021. Uganda’s campaign period and January 2021 elections were marred by violence, voting irregularities, and abuses primarily by the government’s security services against opposition candidates and members of civil society.
According to UBOS, in 2021, the top three countries exporting goods and services to Uganda were China ($1.3 billion), India ($841 million), and Tanzania ($811 million). UBOS reported that, in 2021, the United States exported goods and services worth $130.6 million.
In 2021, the top three countries importing goods and services from Uganda were the United Arab Emirates ($1.05 billion), Kenya ($534 million), and South Sudan ($481 million), according to UBOS. The United States imported goods and services worth $68.6 million from Uganda during that period.
Although Uganda was eligible for African Growth and Opportunity Act (AGOA) benefits in 2022, its exports under AGOA remain low due to high transportation costs, limited U.S. demand for Uganda’s export goods, and poor export capacity. Uganda does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States. The United States signed Trade and Investment Framework Agreements (TIFA) with the East African Community (EAC) in 2008 and with the Common Market for Eastern and Southern Africa (COMESA) in 2001. Uganda is a member of both the EAC and COMESA regional organizations and on November 28, 2018, Uganda formally ratified the agreement establishing the Africa Continental Free Trade Area (AfCFTA).
More information on Uganda’s trade is available here:
The top five reasons to export to Uganda are as follows:
- Growing Free Market Economy: Uganda had averaged 5.3% GDP growth in the five years prior to the COVID-19 pandemic. Despite a slower than projected recovery, the IMF still forecasts 5.7% average growth over the next three years.
- Substantial and Rapidly Growing Consumer Market: Uganda’s annual population growth rate around 3% is, according to the World Bank, among the highest in the world, with nearly four in five Ugandans under the age of 30 and half the population under the age of 15.
- Dynamic Agricultural Market: Uganda has abundant fertile land, favorable weather, and bimodal production throughout most of the country.
- Emerging Oil Industry: Uganda has an estimated 1.4 billion barrels of recoverable oil, with first oil exports expected in 2025. In February 2022, TotalEnergies EP Uganda, CNOOC Uganda Limited, the Uganda National Oil Company (UNOC), and the Tanzania Petroleum Development Corporation (TPDC) reached Final Investment Decision (FID) for the upstream production projects and the East African Crude Oil Pipeline (EACOP) that will bring Ugandan oil to international markets via the Tanga port in Tanzania.
- EAC Customs Union: Uganda’s membership in the EAC Customs Union enables duty free exports to the more than 200 million-person EAC market, as well as duty free exports of a wide range of goods to the United States via AGOA and the Generalized System of Preferences. On July 11, the Democratic Republic of Congo (DRC) officially became the seventh member of the EAC.