Uganda

Economic Overview

The Republic of Uganda's economy is demonstrating resilient growth, underpinned by a strong services sector and a rebound in agriculture. The country is at a pivotal moment, with the impending start of oil production poised to significantly transform its economic structure and growth trajectory. The government's medium-term strategy, outlined in the National Development Plan (NDP III), focuses on enhancing human capital, strengthening the private sector, and improving infrastructure. The 2025-2026 outlook is largely positive, driven by preparations for oil exports, continued public investment, and regional trade integration.

GDP Size & Growth Trajectory

Uganda's economy has recovered robustly from the impacts of the COVID-19 pandemic. Real GDP growth was estimated at 6.0% in the 2023/24 fiscal year, a significant acceleration from previous years. This momentum is expected to continue, with the World Bank projecting growth of 6.1% in 2025 and the African Development Bank forecasting a further rise to 7.0% in 2026.

This growth is broad-based, supported by the services and industrial sectors. Critically, the massive investments in the oil sector's development phase—including the construction of the East African Crude Oil Pipeline (EACOP) and the Tilenga and Kingfisher upstream projects—are major short-term growth drivers. The start of commercial oil production, anticipated around 2025-2026, is expected to provide a substantial long-term boost to GDP and government revenues.

Sector Composition

Uganda's economy is transitioning, though agriculture remains the foundation of its social and economic structure.

• Agriculture: This is the most vital sector, contributing around 24% of GDP but, more importantly, employing approximately 70% of the population. The sector is dominated by smallholder farmers producing key food crops (matoke, maize, cassava) and cash crops like coffee (of which Uganda is a leading African exporter), tea, and cotton. The sector's performance is highly sensitive to weather conditions, making it vulnerable to climate change.

• Services: The services sector is the largest contributor to the economy, accounting for about 47% of GDP. It is driven by wholesale and retail trade, telecommunications, and financial services. The mobile money ecosystem is well-developed, driving financial inclusion and digital commerce.

• Industry: The industrial sector contributes around 26% of GDP, led by construction and manufacturing. Manufacturing focuses on processing agricultural products (food, beverages, tobacco) and producing goods like cement, steel products, and textiles for the domestic market.

Inflation Trends

Inflation has been a recent challenge, driven by external factors like global commodity price shocks and domestic factors such as drought. Headline inflation peaked in late 2022 but has since moderated significantly due to the aggressive monetary policy of the Bank of Uganda (BoU) and improved agricultural output. The AfDB forecasts inflation to stabilize around 5.1% in 2025 and 5.0% in 2026, well within the central bank's target of 5%.

Fiscal & Monetary Policy Stance

• Monetary Policy: The Bank of Uganda has maintained a tight monetary policy stance to anchor inflation, raising its policy rate several times. As inflationary pressures have eased, the BoU has gained some room to maneuver, but it remains cautious, balancing the need to control inflation with supporting economic growth.

• Fiscal Policy: The government is focused on fiscal consolidation to ensure debt sustainability. This involves enhancing domestic revenue mobilization through improved tax administration and containing non-priority expenditures. A key fiscal challenge is managing the large outlays for infrastructure projects, particularly in the oil sector, while maintaining social spending.

Debt Sustainability Indicators

Uganda's public debt has risen significantly due to borrowing for large infrastructure projects. Total public debt was estimated at around 52% of GDP in mid-2023. The debt is considered sustainable, but at a high risk of distress, according to the IMF. A significant portion of the new debt is non-concessional, increasing the debt service burden. Prudent debt management and maximizing the returns on public investments are critical to maintaining long-term sustainability, especially as the country prepares for the influx of oil revenues.

Table 1: Key Macroeconomic Indicators (2023-2026F)

Market Size & Demand Potential

Uganda's market potential is driven by its fast-growing population and strategic location, offering access to the wider East African Community (EAC) market.

Population Size and Demographics

Uganda has one of the youngest and most rapidly growing populations in the world. With a population of over 50 million and a median age of just 16.7 years, the country has a massive demographic dividend. This guarantees a growing labor force and consumer base for decades to come.

Urbanization and Consumer Hubs

Urbanization is proceeding rapidly, with an estimated 27% of the population living in urban areas. The capital city, Kampala, is the country's undisputed commercial and administrative heart, concentrating a significant share of national purchasing power. Other growing urban centers include Gulu, Mbarara, and Jinja.

Consumer Spending & Market Access

Consumer spending is growing, driven by urbanization and a slowly expanding middle class. The market is still dominated by spending on essential goods like food and beverages. The formal retail sector is nascent, presenting significant opportunities for investment in modern shopping centers and supply chain infrastructure. The high penetration of mobile money services provides a ready-made platform for e-commerce and digital service delivery.

Business Environment

The government of Uganda is actively working to improve the investment climate and attract foreign direct investment.

Ease of Doing Business & Regulatory Reforms

Uganda has made progress in streamlining business regulations. The Uganda Investment Authority (UIA) acts as a one-stop-shop for investors, facilitating licensing and providing support services. Reforms have focused on simplifying business registration, automating tax payments, and improving access to credit information.

However, challenges persist. Investors often cite bureaucratic hurdles, corruption, and the slow pace of commercial dispute resolution as key operational constraints.

Company Registration Process

The Uganda Registration Services Bureau (URSB) manages the registration of companies. The process is largely online and involves:

1. Reservation of a company name.
2. Submission of memorandum and articles of association.
3. Declaration of compliance.
4. Payment of registration fees.

Following registration, companies must obtain a Tax Identification Number (TIN) from the Uganda Revenue Authority (URA) and secure any necessary operational licenses.

Tax Regime

• Corporate Income Tax (CIT): The standard rate is 30%.
• Value Added Tax (VAT): The standard rate is 18%.
• Withholding Tax: A 6% withholding tax is applied to payments for goods and services supplied by resident persons.

The government offers a range of incentives for strategic investments, including tax holidays and duty exemptions, particularly for projects in priority sectors like agro-processing, manufacturing, and mineral beneficiation.

Political Stability & Governance

Uganda has enjoyed a long period of relative political stability under the leadership of President Yoweri Museveni and the National Resistance Movement (NRM) party.

Political Environment

The country is a republic with a presidential system. President Museveni has been in power since 1986. While this has provided policy continuity, it has also led to political tensions and a constrained democratic space. General elections are held every five years, with the next one scheduled for 2026. These election periods are often characterized by heightened political activity and potential for social unrest.

Rule of Law & Investor Protection

Uganda's legal system is based on English Common Law. The country has a framework for protecting private property and foreign investments. Uganda is a member of the Multilateral Investment Guarantee Agency (MIGA), providing an additional layer of protection against political risk. The commercial court system is in place to handle business disputes, although processes can be lengthy.

Infrastructure Readiness

Infrastructure development, particularly in transport and energy, is a top government priority, largely driven by the needs of the emerging oil sector.

Transport: The Link to the Coast

As a landlocked country, Uganda is heavily dependent on transport corridors to the sea. The primary route is the Northern Corridor, which connects Uganda to the port of Mombasa in Kenya via road and a meter-gauge railway. The government is also working with Tanzania to develop the Central Corridor, which would provide access to the port of Dar es Salaam.

• Road Network: Significant investment has gone into paving and upgrading the national road network to improve internal connectivity and links to neighboring countries.
• Entebbe International Airport: Located near Kampala, this is the country's main gateway for international air travel and cargo.

Energy Sector: Oil and Renewables

The energy sector is on the cusp of a major transformation.

• Oil and Gas: The discovery of commercially viable oil reserves in the Albertine Graben is the most significant economic development for Uganda. The development phase involves over $15 billion in investment. The crude oil will be exported via the East African Crude Oil Pipeline (EACOP), a 1,443 km pipeline running from Hoima in Uganda to the port of Tanga in Tanzania.
• Hydropower: Uganda has significant hydropower potential. The majority of its electricity is generated from dams on the River Nile, including the Owen Falls, Bujagali, Isimba, and Karuma dams. This provides a reliable source of clean energy.
• Other Renewables: There is also growing investment in solar and biomass to diversify the energy mix and provide off-grid solutions.

Telecommunications & Digital Infrastructure

Uganda has a competitive telecommunications market with high mobile penetration rates. The widespread adoption of mobile money platforms (like MTN Mobile Money and Airtel Money) has revolutionized the financial landscape, enabling digital payments and services across the country. Internet connectivity is improving, with expanding 4G coverage and fiber-optic networks.

Sector-Specific Opportunities

1. Oil and Gas Services

With the oil sector moving into the production phase, there are immense opportunities for service providers throughout the value chain. This includes logistics, construction, engineering, environmental management, and technical services to support the operations of international oil companies. The government has strong "local content" requirements, creating opportunities for joint ventures.

2. Agribusiness and Value Addition

With its fertile land and favorable climate, agriculture is a prime sector for investment. The focus is on commercializing the sector and moving up the value chain.

• Coffee & Tea: Opportunities exist in processing, branding, and direct export of high-quality Ugandan coffee and tea.
• Food Processing: There is a large domestic and regional market for processed foods, from dairy and meat products to fruits and grains.
• Aquaculture: Fish farming is a rapidly growing sub-sector with high demand.

3. Tourism

Known as the "Pearl of Africa," Uganda boasts incredible biodiversity and natural attractions. It is one of only three countries in the world where the endangered mountain gorilla can be seen. The tourism sector is a major foreign exchange earner with opportunities in:

• High-End Eco-Lodges: Developing luxury and mid-range accommodation near national parks like Bwindi Impenetrable Forest and Queen Elizabeth National Park.
• Adventure Tourism: Activities such as white-water rafting on the Nile, mountaineering in the Rwenzori Mountains, and bird watching.

4. Mineral Development

Uganda has significant untapped mineral resources, including gold, copper, cobalt, and rare earth elements. The government is keen to attract investment into formalizing the sector, conducting geological surveys, and developing processing and beneficiation facilities.

5. Real Estate and Urban Development

Rapid urbanization in Kampala and other towns is driving strong demand for modern real estate, including affordable housing, commercial office space, and modern retail centers.