Overview:
The Bank's country director for Uganda, Kenya, Somalia, and Rwanda, Mr. Qimiao Fan, stressed the need for continued fiscal consolidation, advocating for a balanced approach to spending that prioritizes human capital development and growth-enhancing activities.
To propel Uganda’s economy forward, the World Bank has issued a set of critical short-term policy priorities, emphasizing fiscal discipline, export diversification, and a revitalized private sector.
The Bank’s country director for Uganda, Kenya, Somalia, and Rwanda, Mr. Qimiao Fan, stressed the need for continued fiscal consolidation, advocating for a balanced approach to spending that prioritizes human capital development and growth-enhancing activities.
He also highlighted the importance of robust domestic revenue mobilization, coupled with the elimination of wasteful expenditures and reforms in public investment management.
“Efficiency gains in capital utilization could generate an additional 0.2–0.5 percentage points of GDP growth annually,” Mr. Fan stated, underscoring the potential for significant economic improvement through prudent resource management.
This aligns with the Ugandan government’s own fiscal consolidation strategy, as outlined by Permanent Secretary/Secretary to Treasury, Mr. Ramathan Ggoobi, who emphasized improved revenue collection, prudent expenditure, and debt management in the upcoming fiscal year.
A second key recommendation focuses on addressing Uganda’s elevated current account deficit and limited capital inflows. Despite strong exports in sectors like coffee and gold, the deficit remains high due to rising oil project-related imports.
Mr. Fan advocated for improved export diversification and exchange rate flexibility to bolster international reserves. The Bank of Uganda’s data reveals a widening current account deficit, with foreign reserves declining in recent months, highlighting the urgency of this recommendation.
The World Bank’s third priority targets the need to shift Uganda’s growth model towards a private sector-led economy. Mr. Fan expressed concern over the rising cost of credit, with lending rates exceeding 18 percent, which exacerbates existing constraints on credit access and crowds out the private sector.
Experts like Dr. Fred Muhumza from Makerere University Business School echoed these concerns, highlighting the high administrative costs within the national budget and the burden of government arrears. He also pointed to the high interest rates and low investment levels as significant impediments to economic growth.
Mr. Allan Ssenyondwa from the Uganda Manufacturers Association (UMA) emphasized the need for productivity development, particularly at the primary education level, and highlighted the challenges posed by population growth, currency depreciation, and high interest rates on government bonds.
In response, Mr. Moses Bekabye, technical advisor for economic affairs in the Finance Ministry, affirmed the government’s commitment to a tenfold economic growth strategy, focusing on improving productivity and raising household incomes through agricultural development.
The World Bank’s recommendations underscore the need for Uganda to adopt a multifaceted approach to economic management, balancing fiscal discipline, export diversification, and private sector revitalization to achieve sustainable and inclusive growth.