In 2024, Uganda demonstrated a remarkable ability to navigate both domestic and international economic hurdles, achieving impressive growth despite a range of external and internal pressures.
The country’s strategic approach to managing inflation, stabilizing interest rates, and investing in infrastructure laid a solid foundation for economic resilience, highlighting its capacity to adapt to a rapidly changing global landscape, according to the December State of the Economy Report 2024.
A year of steady progress, 2024 saw Uganda capitalize on key sectors such as agriculture, services, and mining, all of which played pivotal roles in driving the nation’s economic expansion. With a focus on sustainable growth, Uganda’s performance in 2024 presents valuable lessons in economic management and offers a roadmap for continued progress in the years to come.
Inflation management was a central theme in Uganda’s 2024 economic story. Despite facing external economic shocks and persistent domestic pressures, inflation remained controlled and stayed below the central bank’s target of 5%. A proactive monetary policy from the Bank of Uganda, which raised the Central Bank Rate (CBR) to 10% by mid-year, proved effective in curbing inflation without derailing economic growth.
A significant factor in this success was the agricultural sector, which recorded strong productivity gains.
The increased output of staple crops such as maize, coffee, and bananas helped stabilize food prices and mitigate the volatility that often accompanies food inflation. Additionally, the stabilization of global oil prices provided relief from external pressures, while improvements in energy supply chains reduced price shocks within the country.
A Robust Growth Story: Agriculture, Services, and Industry Lead the Way:
Uganda’s economy grew by 5.2% in 2024, surpassing initial expectations and reflecting a carefully calibrated mix of policy interventions and investments. Agriculture, a cornerstone of the economy, saw significant expansion, with a 6.5% growth rate, driven by favorable weather conditions and improved market access for smallholder farmers. This sector’s performance not only bolstered rural incomes but also played a crucial role in enhancing food security.
The services sector, which accounts for half of Uganda’s GDP, experienced substantial growth as well. Tourism, which surged by 10% due to increased international arrivals and infrastructure improvements, stood out as a key contributor. Similarly, the telecommunications industry thrived, with mobile money transactions reaching an impressive Shs70 trillion ($19 billion), signaling a continued shift toward digitization.
The mining and manufacturing sectors also posted notable advances. Mining, driven by global demand for gold, lithium, and cobalt, grew by 7%, positioning Uganda as an emerging player in the global mining value chain. The manufacturing sector expanded by 5.5%, benefitting from government-driven industrialization efforts and local content initiatives that encouraged domestic production.
Infrastructure Investment and Fiscal Policy: Building for the Future:
In 2024, the government significantly ramped up its infrastructure investments. The national budget for FY 2024/25 rose by 36%, totaling Shs72.1 trillion. A major portion of this was directed toward energy, transportation, and ICT, underscoring the government’s commitment to modernizing the country’s infrastructure. Key projects, such as the East African Crude Oil Pipeline (EACOP) and hydropower developments at Karuma and Isimba, not only support Uganda’s energy needs but also open the door for long-term economic growth driven by oil and power exports.
In addition, the government made substantial investments in social sectors, particularly healthcare and education. These investments were aimed at strengthening the nation’s human capital, improving public health, and enhancing the quality and accessibility of education, particularly at the primary and secondary levels.
The Ugandan shilling displayed relative stability throughout 2024, with notable appreciation in the first quarter of the year, supported by strong export revenues, especially from coffee. However, demand for the dollar surged in the second half of the year, as key sectors such as telecommunications and manufacturing increased their foreign exchange needs. By August, the currency had stabilized, thanks in part to inflows from non-governmental organizations, exports, and foreign investments.
Interest rates, influenced by the Bank of Uganda’s tight monetary policy, rose steadily throughout the year, with the prime lending rate reaching 17% by December, up from 15% at the start of the year. While higher borrowing costs created challenges for businesses seeking credit, these higher rates were instrumental in anchoring inflation expectations, ensuring overall economic stability.
Addressing Structural Challenges and Embracing New Opportunities:
Uganda’s economic progress in 2024 was driven by improvements across key sectors, yet challenges remained. Inflationary pressures, the volatility of global commodity prices, and infrastructure deficits, particularly in rural areas, continue to pose risks to the nation’s long-term growth prospects. The country will also need to address the skills gap in sectors such as mining and manufacturing to ensure that economic growth is inclusive and sustainable.
Looking ahead, Uganda’s prospects remain bright. The government’s focus on agriculture, energy, and critical minerals will continue to underpin growth. The growing importance of regional cooperation, particularly through frameworks such as the African Continental Free Trade Area (AfCFTA) and the African Mining Vision, will enhance Uganda’s global competitiveness and provide new opportunities for market expansion.
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