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 expected recoverable oil reserves of over 1.5 billion barrels, Uganda is seeing increasing interest among foreign investors.
Prior to the COVID-19 pandemic, Uganda was realizing stable gross domestic product (GDP) growth averaging 5.3% from fiscal year (FY) 2013/2014 to 2018/2019. Due to the economic impact of restrictions aimed at containing the spread of COVID-19, in June 2021, the Uganda Bureau of Statistics (UBOS) reported Uganda’s economy grew by 3.3% in Fiscal Year 2020/2021 (ended June 30). This is a slight improvement from the 3% growth in FY 2019/20, although still below the Ugandan government’s ambitions of 8% annual growth. The COVID-19 pandemic and related Ugandan government restrictions on business activities caused the economic slowdown in the last two fiscal years. As a result of the business closures and low aggregate demand, Uganda has witnessed a sharp increase in unemployment, a massive loss of income, and according to the World Bank, a sharp reversal of poverty gains that began during the 1990s.
According to the most recent complete fiscal year data available, Uganda’s GDP grew by 3.3% to $36 billion, with GDP per capita of $932 in FY 2020/2021. The UBOS indicates that the industrial sector, which comprised 27.4% of the economy, was the primary driver of growth, followed by the service sector, which represented 41.5% of GDP. The agriculture sector, which employs 68% of the workforce and represents 23.4% of GDP, grew 5% in FY 2020/2021. The agriculture sector is primarily based on subsistence or smallholder production. According to the World Bank, about 41.3% of Uganda’s population live below the international poverty line of $1.90 per day. The Ugandan government places its poverty line at $1 a day, and using this amount, the 2019/20 Uganda National Household Survey indicates Uganda’s poverty at 20.3%. In absolute terms, 8.3 million Ugandans live on less than $1 per day, with 300,000 of those estimated to have slipped back into poverty because of the effects of COVID-19 on their incomes. Uganda plans to spend a total of $12.4 billion in FY 2021/2022, an estimated 9.54% lower than the FY 2020/2021 budget. The decrease is primarily due to a reduction in one-off costs from the previous fiscal year, including those related to COVID-19 and election spending.
Uganda’s debt-to-GDP ratio was reduced to 37% in 2018/19 after rebasing of the economy. However, due to the effects of the COVID-19 pandemic, including increased borrowing and lower domestic revenue collections in the face of increased expenditure, the share of public debt to GDP as of June 2021 was 51.9%. In June 2021, the International Monetary Fund (IMF) projected that Uganda’s debt to GDP would peak at 53.2% in FY 2021/22 due to increased borrowing related to the impact of COVID-19, 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
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, irregularities, and abuses by the government’s security services against opposition candidates and members of civil society.
According to UBOS, in 2020, the top three countries exporting goods and services to Uganda were China ($1.1 billion), Kenya ($809 million), and India ($767 million). UBOS reported that, in 2020, the United States exported goods and services worth $117 million.
In 2020, the top three countries importing goods and services from Uganda were United Arab Emirates ($1.8 billion), Kenya ($465 million), and South Sudan ($357 million), according to UBOS. The United States imported goods and services worth $53 million from Uganda.
Although Uganda was eligible for African Growth and Opportunity Act (AGOA) benefits in 2020, 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 Government. 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% GDP growth in the five years prior to the COVID-19 pandemic in FY 2019/20. Despite the economic impact of the COVID-19 pandemic, 5.9% average growth is projected over the next three years, according to the IMF.
- Substantial and Rapidly Growing Consumer Market: Uganda’s population of nearly 45 million people is growing at a rate of 3% per year, with half of 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, and the government projects oil production will begin in approximately 2025. In April and May 2021, Uganda, Tanzania, and Total - the majority shareholder in Uganda’s oil fields – signed a series of agreements unlocking Uganda’s hydrocarbon reserves for export through Tanga in Tanzania.
- EAC Customs Union: Uganda’s membership in the EAC Customs Union enables duty free exports to the 160 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.