Overview:
The World Bank said Uganda’s external position also strengthened, supported by rising export receipts—particularly from coffee and gold—and higher foreign exchange reserves that provided buffers against global uncertainty.
Uganda’s economy maintained strong and broad-based growth in Financial Year 2025 (FY25), defying a challenging global environment, according to the World Bank’s 26th Economic Outlook Report. The lender attributes the performance to robust domestic demand and resilient activity across agriculture, tourism, industry and services.
Inflation remained below the Bank of Uganda’s medium-term target of 5 percent, underpinned by prudent monetary policy and a stable shilling. The World Bank said Uganda’s external position also strengthened, supported by rising export receipts—particularly from coffee and gold—and higher foreign exchange reserves that provided buffers against global uncertainty.
However, the report warns that fiscal pressures intensified during the year. A widening budget deficit and rising debt-servicing costs underscore the urgency of returning to fiscal consolidation, as outlined in the FY2026/27 budget. The Bank called for stronger domestic revenue mobilisation and a rebalancing of public spending toward education, health and infrastructure, while safeguarding debt sustainability and macroeconomic stability.
Oil prospects lift medium-term outlook
The World Bank’s medium-term outlook for Uganda remains positive, with growth expected to accelerate as oil production comes on stream. Current projections assume first oil in FY27, with significant revenues beginning in FY28. Nonetheless, the report cautions that downside risks persist, including fiscal slippage, delays in oil sector development, uncertainty in external development assistance, global trade disruptions and climate-related shocks.
To sustain growth, the Bank urged Uganda to accelerate economic transformation by shifting labour from low-productivity subsistence agriculture into higher-productivity industry and services. Investment in human capital and infrastructure will be critical to harness the country’s demographic dividend and generate better-paying jobs.
Agro-industrialisation remains central to Uganda’s development strategy, offering potential for job creation, higher incomes, export earnings and import substitution. Progress, however, has been slowed by weak primary agricultural production and limited access to complementary services such as irrigation, roads and energy.
Climate resilience and private investment gaps
Qimiao Fan, World Bank Group Division Director for Somalia, Rwanda, Uganda and Kenya, said Uganda continues to face challenges in creating an enabling environment for private investment, particularly along agricultural value chains. He cited policy uncertainty and inadequate investment in inputs, processing, value addition and exports.
“Addressing these challenges will require strong and sustained investments and enabling policies,” Mr Fan said, highlighting the need to improve access to agricultural extension services, modern inputs, irrigation and mechanisation. He also stressed the importance of expanding agricultural finance and insurance, especially for primary producers, and integrating climate resilience into development planning given the sector’s vulnerability to climate change.
Through initiatives such as Agri-Connect, the World Bank said it will support Uganda’s transition to climate-resilient agro-industrialisation to drive sustainable growth, job creation and poverty reduction.
Financial sector stability and easing credit conditions
The upbeat growth outlook is reinforced by data from the Bank of Uganda (BoU), which shows the financial sector remained sound and stable in FY2024/25. The ratio of non-performing loans declined to 3.68 percent in June 2025, from 4.13 percent in March 2025 and 4.95 percent a year earlier, reflecting improved debt-servicing capacity among households and businesses.
Average shilling-denominated lending rates rose to 18.16 percent in FY2024/25 from 17.89 percent the previous year, driven by stronger demand for credit—particularly in trade and household loans—and higher yields on government securities. However, rates eased in the second half of the year following successive cuts in the Central Bank Rate, averaging 17.89 percent compared with 18.42 percent in the first half.
BoU Governor Michael Atingi-Ego said the Uganda shilling continued to appreciate in FY2025/26, strengthening by an average of 1 percent per month and gaining 3.9 percent between June and October 2025. The appreciation was supported by strong foreign exchange inflows from coffee exports, remittances, tourism, oil-sector foreign direct investment and portfolio inflows into government securities.
As a result, foreign exchange reserves rose to $4.98 billion (Shs17 trillion) by end-September 2025—equivalent to 3.7 months of import cover—up from 2.3 months a year earlier.
Trade deficit narrows
The strengthening external position was also reflected in a narrower trade deficit. Ramathan Ggoobi, Permanent Secretary and Secretary to the Treasury, said the trade gap narrowed by 3.6 percent in FY2024/25 to $4.67 billion (Shs16 trillion), driven by improved export performance. Export earnings rose by $3.16 billion, more than offsetting a $2.99 billion increase in imports.
Together, the World Bank and central bank assessments paint a picture of an economy on a solid growth path, but one that must confront fiscal discipline, structural reforms and climate risks to fully realise its oil-led and agro-industrial potential.