By J.L. Andrew
Budget
Kampala: Uganda has made significant strides in recovering from the various internal shocks that have affected its performance over the past four years, including the COVID-19 pandemic and other challenges.
The Minister of Finance Planning and Economic Development (MOFPEd) has emphasized that the country’s Gross Domestic Product (GDP) is expected to grow by 6% in the financial year 2023/24, surpassing the 5.3% growth recorded in FY2022/23.
During the presentation of the Budget FY 2024/2025, under the theme: “Full Monetisation of Uganda’s Economy through Commercial Agriculture, Industrialisation, Expanding and Broadening Services, Digital Transformation and Market Access” at the Kololo Independence Grounds, pointed out that Uganda’s projected growth of 6% this year is particularly impressive when compared to the Sub-Saharan Africa’s average of 3.8% and the global average of 2.9% for the year 2024.
Furthermore, Kasaija mentioned that the budget for FY2024/25 is the fifth and final implementation of the Third National Development Plan (NDPIII), stressing that the budget will serve as the foundation for the government’s strategy to increase the size of Uganda’s GDP from approximately USD 50 billion in FY2022/23 to USD 500 billion by the year 2040.
The Minister highlighted that the economy has experienced significant growth over the past few years, with the current estimated size at UG Shs202 trillion (USD53.3 billion), up from UG Shs184.3 trillion (USD48.8 billion) in nominal terms.
If this GDP were to be equally distributed among Ugandans, he said each citizen would have a GDP per capita of USD1, 146, compared to USD1, 081 in the previous Financial Year 2022/23.
The Minister emphasized that the economy’s improved performance is due to strong growth across all sectors, with services, agriculture, and industry estimated to grow at rates of 6.6%, 5.1%, and 5.8%, respectively, in FY2023/24.
Notably, he noted the services sector has shown impressive growth, driven by a robust recovery in retail and wholesale trade, tourism, communication, and real estate activities.
The Minister also pointed out that the industry sector’s growth was primarily fueled by manufacturing, construction, and mining, while increased production of food, cash crops, and livestock supported growth in the agriculture sector.
He attributed the positive performance of the agriculture sector, which expanded by 5.1% this year compared to 4.5% in FY2022/23, to the effective implementation of the Parish Development Model (PDM) and favorable weather conditions.
Other contributing factors to the robust economic growth were the low inflation rate and the stable exchange rate, enabling better investment strategies and enhancing export competitiveness. Additionally, the increased investments in oil and gas projects, backed by Foreign Direct Investment, played a significant role.
He noted that the surge in external demand for Uganda’s agricultural and industrial goods further fueled economic growth.
The revival of the tourism sector was credited to the heightened investments in tourism infrastructure and marketing efforts, despite the prevailing peace and security ensuring the safety of individuals and their assets.
Graduating from LDCs
During his address, Kasaija highlighted that in March 2024, Uganda fulfilled the criteria for transitioning out of the Least Developed Countries (LDCs) classification and progressed from low human development to medium human development.
He credited this achievement to the ongoing enhancements in healthcare, education, economy, and overall quality of life.
“This is a big milestone achieved well before the country starts earning from oil exports,” he noted.
Kasaija highlighted that by the time oil and gas production commences in FY2025/26, along with strategic value addition to the nation’s natural resources and effective utilization of the PDM and other wealth creation programs, the achievement of prosperity for all and socio-economic transformation will be accelerated.
He also pointed out that Uganda’s inflation rate stood at an average of 3.2% in the twelve months leading up to May 2024, positioning it as one of the most stable in the region.
He mentioned that the annual headline inflation has significantly dropped from its peak of 10.7% in October 2022 to 3.6% in the previous month.
The decline was attributed to the successful coordination of monetary and fiscal policies, resulting in low inflation rates across various sectors such as food crops, processed foods, and essential goods like soap, sugar, and cooking oil.
He also noted that the lending interest rates for commercial banks reduced to 17.7% in April 2024 compared to 19.3% in April 2023.
The interests rates in the domestic debt market, he said have remained broadly stable averaging 11.2% on the one-year Government Treasury Bills.
Long-term affordable capital
The minister announced that the government will persist in providing long-term affordable capital through various interventions to further decrease lending rates.
Specifically, the government will continue to inject capital into the Uganda Development Bank, the Parish Development Model, the Agricultural Credit Facility, and the Small Business Recovery Fund to facilitate wealth creation.
The government intends to sustain the capitalization of the Emyooga Fund to aid micro-enterprises, along with the Presidential Skilling and Industrial Hubs for the youth, while more grants will be allocated to women in business through the Generating Growth Opportunities and Productivity for Women Enterprises (GROW) project.
Kasaija disclosed that the government is launching the Investment for Industrial Transformation and Employment (INVITE) Fund valued at USD 210 million (Shs800 billion) in the upcoming financial year to assist exporters of manufactured goods facing working capital constraints.
He emphasized that the private sector credit has also risen to Shs21.54 trillion in April 2024 from Shs20.47 trillion in April 2023, marking a 5.2% increase.
“There has also been a slight increase in the share of credit going to productive areas of the economy. For example, the share of credit going to agriculture increased slightly to 11.3% by April 2024 compared to 11.1% by April 2023, while the share of credit to manufacturing remained the same at 13.4%,” he added.
Despite facing depreciation pressure, the Uganda Shilling has managed to maintain its stability against major global currencies. The official exchange rate against the US Dollar averaged Shs 3,771 between May 2023 and May 2024, a testament to the country’s strong export performance and Foreign Direct Investment (FDI) inflows.
Increase in exports
Kasaija highlighted that Uganda experienced a significant increase in exports during the year ending April 2024. The total export value rose by USD2.534 billion, reaching USD7.471 billion compared to USD4.938 billion in April 2023, indicating a growth rate of 34%.
This growth can be largely attributed to the increased exports of various commodities. Gold exports saw a remarkable increase of 75.7%, followed by coffee at 21.9%, oil re-exports at 21.8%, sim-sim at 20.2%, tobacco at 10.3%, cotton at 6.9%, and light manufactured products at 4.9%.
The primary destinations for Uganda’s exports are the East African Community (EAC) countries, accounting for 29% of the total, followed by COMESA at 29%, the Middle East at 24%, and Asia at 20%.
Kasaija emphasized that manufactured products also played a significant role in export earnings. In 2023, cement exports reached USD91.1 million, sugar exports amounted to USD75.8 million, plastic products reached USD62.6 million, soap exports stood at USD33.9 million, and beer exports amounted to USD25.8 million.
To enhance export performance, efforts have been made to invest in targeted value addition initiatives and implement enabling trade policies.
Furthermore, in the financial year ending, Uganda’s imports amounted to USD12.9 billion, compared to USD10.3 billion in the year ending April 2023. This increase of 23% in private sector imports was primarily driven by the development of the country’s nascent oil and gas sector.
In terms of Foreign Direct Investment (FDI), Uganda received USD2.46 billion in FY2022/23, and an additional USD1.27 billion was attracted by December 2023/24.
The remittances from Ugandans living and working abroad increased to USD1.43 billion in calendar year 2023, from USD1.3 billion in 2022. Additionally, tourism revenues rose to USD1.28 billion in calendar year 2023, compared to USD1.07 billion in calendar year 2022.
Employment performance
Kasaija reported that the number of workers enrolled in different pension schemes in the nation rose to over 3.14 million members in FY2023/24, marking a 4.2% increase from the 3.01 million members in FY2022/23.
He highlighted that recent data shows that the direct beneficiaries of the Presidential Initiative on Jobs and Wealth Creation (Emyooga) totaled 2,237,402 in December 2023, with Emyooga funds generating 378,640 new direct jobs in the past year.
This represents an additional 40,000 new jobs compared to the previous year.
Additionally, he noted that 1.165 million households have received PDM funds amounting to Shs1.126 trillion as of May 2024, expected to create around 2.5 million jobs.
Furthermore, 23,083 youth projects have supported 263,897 youths through the Youth Livelihood Programme in sectors like agriculture, trade, services, and industry, resulting in over 1,250,000 indirect jobs.
The National Special Grant for Persons with Disabilities is aiding 6,282 enterprises, benefiting 49,372 individuals with disabilities.
Creating over 200,000 new jobs
The government is also strategizing to generate additional formal employment opportunities and support sustainable livelihoods by implementing various project-funded initiatives, such as the GROW and INVITE Projects.
The GROW Programme aims to provide direct assistance to more than 8,000 female-owned businesses, 280,000 female entrepreneurs, and 1.6 million indirect beneficiaries, while the INVITE Project is projected to result in the creation of 200,000 new job opportunities through fresh investments.
Fiscal Performance
Kasaija highlighted the positive outcomes of the government’s fiscal consolidation agenda, which aiming to boost revenue collection, limit borrowing for critical investments, and control government spending.
As a result, he said the fiscal deficit has decreased to 4.5% of GDP in the current financial year, compared to 5.5% of GDP in the previous year.
He emphasized that the projected domestic revenue for FY2023/24 is expected to reach Shs27.725 trillion, falling short of the target of Shs29.672 trillion by over Shs1.9 trillion.
He noted that the Uganda Revenue Authority is actively working to reduce this shortfall before the end of the fiscal year.
The revenue to GDP ratio is estimated to be 13.6% in FY2023/24, and domestic revenue for FY2024/25 is projected to reach Shs31.982 trillion, equivalent to 14.2% of GDP.
Furthermore, Kasaija mentioned that following the recovery of the economy from various internal and external shocks, the next fiscal year 2024/2025 is expected to witness a steady-state growth potential of 6.4% to 7%, with double-digit growth anticipated over the next five years.