Ugandan Economy

Ugandan Economy

Uganda Economy

Below is a detailed review of the Economy of Uganda

Economic Overview

Starting in the late 1980s, the Uganda government has pursued a series of stabilization and pro-market structural reforms. The resultant macroeconomic stability, post-conflict rebound, and investment response generated a sustained period of high growth during 1987-2010. Real gross domestic product (GDP) growth averaged 7% per year in the 1990s and the 2000s, placing Uganda among the 15fastest growing economies in the World. However, over the past decade, the country witnessed more economic volatility and the growth in gross domestic product (GDP) slowed to an average of just about 5%. With the population increasing at a rate of at least 3% per annum through these decades, per capita income growth decelerated from a rate of 3.6% recorded in the decades of 1990s and 2002, to about 2%. Going forward, takeoff of a huge public investment program and resumption of private sector economic activity in the post-election era is expected to drive growth. This notwithstanding, the effects of a volatile global economy on demand for Uganda’s exports and timing of key infrastructure projects in the country’s oil sector, could offset any benefits of improved terms of trade due to low oil prices. Under these circumstances, the Ugandan economy is forecast to grow at a rate of approximately 5.9% in FY16/17. Growth will increase to 6.8% in FY17/18, and thereafter stay on an upward trajectory into the medium term, if major infrastructure projects are implemented as planned, and private investment intensifies with oil-related activities.

Political Context
President Yoweri Kaguta Museveni was re-elected for another five-year term defeating seven challengers in elections held on February 18, 2016. The incumbent, has been in power since 1986 after a five year military conflict. President Museveni’s prolonged stay in power is a result of the constitutional amendments approved by a referendum in July 2005. The amendments introduced multi-partyism and led to Parliament lifting the two, five-year presidential term limits, which allowed President Museveni to seek a third term in office during the elections in 2006.

For about 20 years of Museveni’s rule, the country faced an insurgency in the north and earlier sporadic skirmishes in the eastern part of the country. Today, the whole country has been pacified and is largely peaceful, however, numerous challenges are keeping the country from attaining full democratic progress, including corruption, underdeveloped democratic institutions, and human rights related abuses.

Development Challenges

Uganda surpassed the Millennium Development Goals (MDGs) target on halving poverty by 2015, and made significant progress in reducing the population that suffers from hunger, promoting gender equality and empowering women. But a large proportion of its population is highly vulnerable to falling back into poverty, making achievements of the twin goals a challenge. With almost half of its people under the age of 15 years (one of the world’s youngest populations) and a fertility rate estimated at 5.7 children per woman (2015), Uganda has a very high dependency ration and population growth that generates 700,000 new labor market entrants every year. Achieving good livelihood would entail overcoming challenges, such as low levels of productivity of both agricultural and non-agricultural sectors; inappropriate urban development; the slow development of infrastructure; and the limited availability of credit. Moreover, the persistently high rates of poverty in the Northern region pose a challenge reducing regional inequality.

Development Strategy

‘Uganda Vision 2040’ aspires to transform the country from a low-income to a competitive upper middle-income country with a per capita income of US$9,500. The government’s Vision is delivered through a series of five-year National Development Plans (NDPs), the second of which was launched in June 2015. The NDP II is designed to be the primary government national strategic plan and guide Uganda’s fiscal strategy. It aims at increasing overall competitiveness; creating additional wealth and employment while emphasizing inclusive and sustainable growth. The Plan prioritizes key development opportunities and fundamentals in agriculture, tourism, mineral development, infrastructure and human development. A key challenge will be to address the implementation constraints, which has affected the implementation of the first NDP.

World Bank Group Engagement

The World Bank Group is preparing its next Country Partnership Framework (CPF) for the period FY16-21. The CPF is developed in partnership with the Government of Uganda and draws upon the Systematic Country Diagnostic (SCD), which was prepared in close consultation with national authorities and other stakeholders in order to identify the most critical constraints and opportunities facing Uganda. The CPF is designed to assist Uganda to address its national priorities with a focus on ending extreme poverty and promoting shared prosperity in a sustainable manner. The WBG will accordingly support the Government to sustain high rates of growth, socio-economic transformation and inclusion, and reduce poverty and vulnerability to shocks, including from climate change. The CPF is expected to be presented to the Board on April 21, 2016.

Through the East Africa Trade and Transport Facilitation Project (EATTFP), border clearance times have significantly reduced and are now among the lowest in East and Southern Africa.

The Private Sector Competitiveness Project II facilitated the recruitment of a secretariat to support the Business Licensing reform work under the International Finance Corporation (IFC) Uganda Investment Climate Program. Key results achieved include: Reduction in time taken to obtain a trading license from 15 to four days and reduction of fees by 25% across all segments of businesses. This reform benefitted over 501,000 and led to annual private sector cost savings in excess of $2.5m. Of 766 licenses issued by central and local governments, 41 redundant/obsolete licenses were eliminated, 294 simplified; eight amalgamated into four, and five reclassified through a Cabinet Instrument, leading to annual private sector cost savings in excess of $53.2m. To ensure full implementation of agreed reforms and realize impact through full automation of the business licensing and business registration processes, the World Bank Group (WBG) is supporting a $10m component under the $100m WBG lending operation to the government.

Through the Health Systems Strengthening Project, seven out nine hospitals for renovation, have been completed and handed over to government. These include: Anaka, Entebbe, Iganga, Kiryandango, Mityana, Moroto and Nakaseke. Scholarships to 797 health workers with most of the beneficiaries pursuing diploma courses (298) followed by Masters Degrees (195), and of which 384 have already completed their studies. As many as 230 health facilities countrywide have received medical equipment and 30 facilities countrywide, an e-recruitment job bureau at the Health Service Commission has been set up. Through the project, the government will be able to strengthen management capacity for frontline health service delivery and ensure functionality of the existing health infrastructure.

The East Africa Public Health Laboratory Project supported the Uganda National Tuberculosis Reference Laboratory to reach the gold standard ISO accreditation, and quality to serve as a prestigious WHO Supranational Referral Laboratory, the second of its kind on the continent. The project has also empowered countries to provide leadership regionally and serve as centers of excellence for disease control efforts through expanding the pool of qualified personnel and developing a regional framework for cross-border surveillance.

The 2014 Ebola outbreak highlighted major gaps in disease prevention and control efforts in health systems across East Africa.

The Second Northern Uganda Social Action Fund, (NUSAF 2) project closed on February 29, 2016. NUSAF is a community-driven development project, which started in 2003 and is now going into its third phase. Under NUSAF2 a total of 10,487 subprojects have been completed, thus exceeding the originally planned 9,750 subprojects by the end of the project implementation period. In Education, for example, 1,846 primary school teachers are now housed in staff houses built using NUSAF2 project funds.

Through the Kampala Institutional and Infrastructure Development Project (KIIDP), institutional efficiency has been registered by the Kampala Capital City Authority (KCCA) through reduction of overdue liabilities, increase in KCCA own source revenue and increased share of KCCA own source revenue spent on service delivery. KIIDP II will address the city’s investment bulk-log.