Standard Bank economist questions Uganda’s growth paradox as GDP nears 7%

KAMPALA — Uganda’s economy is on track to join the coveted seven percent growth bracket, but ordinary households are yet to feel the full benefit of that expansion, a top regional economist has said.

Speaking at the 5th Stanbic Economic Forum in Kampala, Jibran Fauz Qureish, Head of Africa Economic Research at Standard Bank Group, posed a blunt question that framed the discussion: “Why is the macro so good, yet the micro so bad?”

Mr Qureish said Uganda’s headline economic indicators paint a strong picture, with growth estimated at about 6.3 percent in the 2024/25 financial year and projected at between 6.5 and 6.7 percent in 2025/26. By 2026/27, annual growth could approach seven percent.

“We said five years ago that Uganda would join the seven percent growth club. That projection is manifesting,” he said.

Growth has been driven largely by oil-related investments, public infrastructure spending, and steady performance in agriculture. Major construction works, including road projects, airport upgrades and preparations for the Africa Cup of Nations, have boosted output in construction and industry.

“We’re seeing a pickup in output, electricity is up, and construction is buoyed by public investment,” Mr Qureish said.

However, he cautioned that strong macroeconomic performance has not automatically translated into broad-based improvements in household welfare.

“Even though the GDP numbers look impressive, the dinner table story remains different,” he said.

Uganda’s labour market remains heavily informal, with between 80 and 90 percent of workers engaged in informal employment. Many households depend on small-scale farming or daily wage activities that are less directly linked to large capital-intensive projects.

“The issue of macro good, micro bad is not about rich versus poor, it’s about asset holders versus non-asset holders,” Mr Qureish said, noting that those who own land, capital or financial instruments tend to benefit faster from investment-led growth.

On the external front, Uganda’s foreign exchange reserves have strengthened significantly. Reserves stood at about $3 billion at the end of 2024 and nearly doubled by the close of 2025, supported by strong export earnings and foreign portfolio inflows into government securities.

Offshore holdings of Ugandan government debt have risen from under $1 billion two years ago to roughly $3 billion.

“Even when foreign investors have taken profits, they’ve largely stayed in the swap markets, which means they haven’t exited Uganda physically. That signals confidence,” he said.

The shilling, however, faced pressure in late 2025 amid investor hedging ahead of the election season and regional political developments. Mr Qureish said these pressures were driven more by sentiment than weak fundamentals.

He commended the Bank of Uganda for its restrained approach to foreign exchange intervention, which has helped preserve reserves.

“The Bank of Uganda does not intervene when the currency is weakening, which is great because it does not drain your foreign exchange reserves. But to show the market you’re there is important,” he said, describing the central bank as one of the most proactive in the region.

Standard Bank Research expects inflation to remain below five percent in 2026, creating room for a possible interest rate cut of at least 25 basis points later in the year.

On fiscal policy, Mr Qureish warned that frequent supplementary budgets risk undermining fiscal credibility and crowding out private sector lending. He advised government to consider substituting part of domestic borrowing with external concessional financing from institutions such as the IMF and World Bank.

He also pointed to a planned domestic gold purchase programme by the central bank as a potential boost to reserves. Under the initiative, the Bank of Uganda would buy gold from artisanal miners in shillings, adding to its reserve assets.

“That will add further muscle to Uganda’s foreign exchange reserves,” he said.

Despite the positive outlook, Mr Qureish stressed that inclusive growth remains the key test.

“We are constructive on Uganda, but inclusive growth remains the true test,” he said.

As oil production ramps up and infrastructure investment continues, he noted, policymakers will need to ensure that macroeconomic stability increasingly translates into jobs, rising incomes and tangible improvements in living standards for ordinary Ugandans.