Uganda’s economy continues to demonstrate strong performance, with real GDP accelerating from 6.1% to 6.8% between July 2024 and March 2025, according to the World Bank’s 25th Uganda Economic Update: Increasing Uganda’s Fiscal Space through Improved Revenue Mobilization and Enhanced Efficiency of Spending and Service Delivery. Growth was primarily driven by the supply side, particularly in commodity-producing sectors and manufacturing, with notable contributions from pharmaceuticals and construction-related activities. In contrast, the services sector experienced a broad slowdown. On the demand side, household consumption remained robust, followed by government spending. Inflation stayed below the central bank’s 5% target, supported by favorable food supply, stable global commodity prices, exchange rate stability, and prudent monetary policy management.
The report projects that growth could accelerate to 10.4% in FY2026/2027 with the commencement of oil production, before stabilizing around 6%. Oil production has the potential to significantly improve Uganda’s external and fiscal position. However, the timing of production and completion of key infrastructure, such as export pipelines, remains uncertain. Additional risks include global shifts away from hydrocarbons, potential reductions in oil prices, supply chain disruptions due to geopolitical conflicts, economic policy uncertainty, climate-related shocks, and delays in implementing revenue-raising reforms.
Uganda faces an urgent need to increase investment in human capital—including education, health, and social protection—to fully harness its demographic dividend and achieve its Vision 2040 and Ten-fold Growth Strategy objectives. With a tax-to-GDP ratio of approximately 14%, below both peer countries and the government’s 16%-18% target, the country must enhance domestic revenue collection while improving the efficiency of public spending to meet development goals.
The report provides detailed recommendations for domestic revenue mobilization. Key measures include adjusting personal income tax rates and brackets to account for inflation, raising the exemption threshold from UGX 2.82 million to UGX 4.02 million per year, maintaining current rates for most taxpayers, and introducing a 35% tax band for higher-income earners. These measures are expected to raise nearly UGX 149 billion (0.1% of GDP) while promoting equity. Additional recommendations include strengthening taxation of high-net-worth individuals, revising corporate income tax exemptions, refining investment incentive thresholds, improving targeting of incentives, and addressing private sector concerns to boost tax compliance and morale.
To improve efficiency in public spending and service delivery, the report advises a balanced adjustment in expenditures, prioritizing human capital and growth-enhancing investments. Policies should target wasteful spending, including cuts to the large public administration budget, reduce inefficiencies such as absenteeism in social sectors, and enhance public project execution through strengthened investment management. Guidelines should be introduced for the creation of new administrative structures, and local governments should be supported to generate comparable levels of own-source revenue through a comprehensive OSR policy framework. These reforms are intended to maximize the impact of public funds, reduce borrowing needs, and sustain critical investments in social services and infrastructure.
