Kampala: Recent data from the 23rd edition of the Uganda Economic Update, published by the World Bank, highlights significant shifts in employment rates and access to essential commodities while providing a detailed analysis of the nation’s trade and external financing landscape. A phone survey conducted by the Uganda Bureau of Statistics (UBOS) indicates that employment rates fell from 82 percent in October/November 2023 to 75 percent in January/February 2024. This decline is primarily attributed to seasonal changes and illnesses, with nonseasonal factors such as business closures, layoffs, and the inability to purchase inputs accounting for only 9 percent of the reported unemployment.
Despite these employment challenges, access to essential goods such as sugar, beans, sweet potatoes, cooking oil, and maize flour has improved as supply chains recover. However, significant disparities remain between the richest and poorest households.
“Over 40 percent of households in the bottom consumption quintile reported being unable to access any bread, compared to just 5 percent of households in the top quintile,” the report found.
The report also highlighted discrepancies in healthcare spending, with two-thirds of households paying out-of-pocket (OOP) for health services.
The survey also found that “while those who needed health services typically received them, two-thirds paid out of pocket (OOP) for health services, with the richest households spending the highest amounts. On average, households in the top quintile spent USh 159,108 (US$42) per capita per year on health services, more than twice the amount spent by households in the poorest quintile.
In the broader economic context, Uganda’s current account deficit narrowed slightly from 8.2 percent of GDP in FY22/23 to 8.1 percent in FY23/24. This adjustment was driven by a surge in imports, which offset the recovery of goods exports and tourism. The total value of exports and imports rose from 40 percent of GDP in the second half of FY22/23 to 46.6 percent in the first half of FY23/24, with merchandise trade representing over 90 percent of the current account. Imports increased from 24.7 percent of GDP to 28.2 percent, reflecting higher domestic demand, oil-related investments, and the normalization of global supply chains.
The oil-import bill for the first half of the fiscal year was US$898 million, up 5.3 percent year-on-year. Private-sector imports also increased to support investments, particularly in the oil and gas sector. This surge in imports was offset by a significant rise in exports of goods and services, which grew by 2 percentage points of GDP to 18.4 percent. Gold and coffee exports performed robustly, supported by elevated global prices.
Despite domestic terrorist threats, travel and tourism receipts rose to US$605 million in the first half of FY23/24, marking a 30.5 percent year-on-year increase. Other exports, excluding coffee and gold, grew by 18 percent year-on-year to US$2.9 billion. Remittances, though down by 4 percent year-on-year, remained a key component of external finance, amounting to US$711.8 million in the first half of FY23/24.
External financing conditions have remained challenging due to high borrowing costs on international capital markets. The current account deficit was primarily financed by Foreign Direct Investment (FDI) and public-sector borrowing, largely on concessional terms. FDI inflows remained stable at US$1.48 billion in the first half of FY23/24, slightly higher than the same period in the previous fiscal year. International companies faced various shocks, but equity investments in enterprises accounted for the bulk of this increase. Other investment inflows rose from US$207 million to US$309 million over the period.
The decision by the Financial Action Taskforce (FATF) to remove Uganda from the Grey List in February 2024 positively impacted investor sentiment, potentially boosting future capital inflows.
These findings underscore the resilience of Uganda’s economy in the face of various challenges, highlighting areas for continued focus and improvement to sustain growth and development.