Authors
What are your thoughts on Uganda's current economic trajectory?
The government’s ambitious goal of increasing GDP tenfold by 2040 hinges on achieving double-digit growth rates over most of the next 14 years. While countries like Guyana have achieved such growth in recent years, underpinned by oil production, sustaining it for the long-term presents significant challenges.
China’s experience with broad-based, multi-sectoral development offers valuable lessons. The key question is: can Uganda replicate such growth across multiple sectors?
The government has identified Agriculture, Tourism, Manufacturing, and Science, Technology & Innovation (ATMS) as strategic pillars for future development. To realise this vision, Uganda must prioritise multi-sectoral growth, implement targeted interventions, and ensure consistent investment across these areas.
How do you assess the impact of recent economic policies on inflation, employment, and poverty reduction in Uganda?
Uganda’s economic policy has consistently aimed to keep inflation below 5 percent, and the Central Bank has largely succeeded in maintaining this target. This achievement is commendable, especially when compared to countries like the US and UK, where inflation for basic commodities—such as eggs—became a major concern. Maintaining stable inflation and exchange rates is critical, as volatility in either can lead to imported inflation and broader economic instability.
As we approach the election period, it’s essential that the Central Bank continues its prudent monetary policy. Historically, election cycles have brought increased spending pressures, which—if not carefully managed—can undermine productivity and trigger inflation. We should not forget the lessons from 2011, where inflation surged due to excessive government spending and loose monetary controls, leading to social unrest.
Regarding employment, inflation presents a nuanced challenge. While excessive inflation is harmful, a moderate level can stimulate investment and job creation. Japan’s prolonged period of low or negative inflation illustrates how prolonged low or negative inflation can hinder economic growth. The question remains whether Uganda’s 5 percent inflation target is optimal, especially in light of evolving global economic trends.
Employment, particularly among youth, remains a pressing issue. While job creation has occurred—especially in manufacturing—many roles do not offer wages that meet the cost of living. It’s important to look beyond job numbers and assess the quality of employment. Jobs should provide fair compensation, job security, and opportunities for skill development to truly contribute to poverty reduction and inclusive growth.
What role can the private sector play in driving economic growth and development in Uganda?
The government rightly acknowledges the private sector as the engine of economic growth. Its potential contributions span several areas, starting with innovation and import substitution. Uganda continues to import more than it exports, resulting in a persistent trade deficit. For years, government policy has aimed to prioritise the importation of capital goods while minimising consumer goods imports.
Despite this, our retail shelves remain dominated by imported products. Encouragingly, local companies such as Mulwana Group, Bidco, Movit, and Mukwano have made strides in providing locally produced alternatives. However, as consumer preferences evolve and demand for more sophisticated goods increases, the import bill continues to grow—highlighting both a challenge and an opportunity for the private sector to meet this demand affordably and competitively.
A major constraint facing private enterprises is government debt arrears. Many companies are owed substantial sums, which affects their cash flow, limits their ability to repay loans, and hinders investment. Addressing these arrears should be a top priority for the government to restore confidence and liquidity in the private sector.
Another pressing issue is high taxation. Corporate tax rates of 30–40 percent are burdensome and discourage reinvestment. For individuals and businesses to thrive, saving and reinvesting must be feasible. If taxes are high but public services—such as healthcare—are underperforming, taxpayers end up paying twice: once through taxes and again through private alternatives.
A review of the tax regime is essential. Lower tax rates would allow companies to reinvest more in growth and innovation, while individuals would have greater capacity to save and invest. In turn, government would collect more taxes from a broadened economic base. If public services are improved alongside tax reforms, the private sector can play an even more transformative role in Uganda’s development.
What are your recommendations for improving financial inclusion and access to credit for small businesses and individuals?
Financial inclusion in Uganda has largely been driven by mobile money, which has significantly expanded access to financial services for anyone with a mobile phone. However, challenges remain. Some individuals are unable to use mobile money due to lost phones or limited access to their accounts. Additionally, the high cost of mobile money transactions is a barrier. Reducing or eliminating taxes on mobile money could make it more affordable and inclusive, especially for those who rely on it for receiving payments.
Imposing taxes on mobile money may undermine its potential as a financial lifeline for underserved communities. With better use of mobile data and transaction tracking, it’s possible to distinguish between personal transfers and payments for goods and services—allowing for more targeted and fair taxation policies.
Another major barrier is the high cost of credit. Financial institutions often prefer lending to the government through treasury bills and bonds, which offer risk-free returns. As long as these instruments yield double-digit returns, lending to individuals and small businesses will remain expensive. To address this, the government must work to reduce the cost of borrowing, ideally bringing interest rates down to single digits. This would make credit more accessible and affordable for entrepreneurs and small enterprises.
Improving financial inclusion requires a multi-pronged approach: Lower transaction costs for mobile money, smarter taxation policies, reduced interest rates on credit, strengthening financial literacy and digital access.
These steps would empower more Ugandans to participate meaningfully in the economy and support the growth of small businesses.
