The Independent Uganda: You get the Truth we Pay the Price
Gold continued to dominate export receipts, contributing over 40 percent of merchandise exports, although much of this reflected re-exports.
Kampala, Uganda | JULIUS BUSINGE | Uganda’s economy in 2025 closed the year on a relatively strong footing, marked by steady growth, low inflation and cautious macroeconomic management, but beneath the headline stability lay deep fiscal, structural and social pressures that continue to test policymakers.
The 2025 growth defied global headwinds that included tighter international financial conditions, geopolitical tensions and shifting development financing. According to data from the Uganda Bureau of Statistics and the Ministry of Finance, real GDP growth reached about 6.3 percent in FY2024/25, up from 6.1 percent the previous year. This performance placed Uganda among the faster-growing economies in Sub-Saharan Africa.
Growth was broad-based. Agriculture, manufacturing, construction and services all contributed, supported by household consumption and public investment. Per capita income rose from US$ 1,159 last year to US$ 1,263 , signalling modest improvements in living standards, though these gains remained uneven across regions and income groups.
In its end-of-year assessment, the Civil Society Budget Advocacy Group (CSBAG) described 2025 as a year of “profound economic contradictions”. “The major interrogation is no longer whether Uganda can grow, but whether that growth is translating into tangible improvements in the lives of ordinary Ugandans,” said Julius Mukunda, CSBAG’s executive director, reflecting concerns about inclusion and equity.
Inflation contained, vigilance maintained
One of the most notable macroeconomic achievements of 2025 was the containment of inflation. Headline inflation averaged between 3.5 and 3.9 percent during the year, remaining well below the Bank of Uganda’s 5 percent target. UBOS attributes this outcome to favourable food supply conditions, easing global commodity prices and disciplined monetary policy.
The Bank of Uganda maintained a tight but steady policy stance, holding the Central Bank Rate at 9.75 percent for most of the year. The Monetary Policy Committee noted that while inflation was subdued, risks persisted from exchange-rate volatility, climate-related food shocks and rising election-related spending pressures. The central bank emphasised that preserving price stability remained critical as Uganda heads toward the 2026 general elections.
Interest rates in the broader economy, however, remained elevated. Commercial lending rates stayed in double digits, reflecting government domestic borrowing and structural inefficiencies in the financial sector. This raised concerns about private sector credit growth, particularly for small and medium-sized enterprises.
Key sectors and commodity exports
Agriculture remained a backbone of the economy in 2025. Coffee stood out as Uganda’s leading export commodity, accounting for roughly 15 to 20 percent of merchandise export earnings. According to official trade statistics, coffee export volumes and revenues rose sharply, supported by good weather, improved farm practices and strong global demand.
Gold continued to dominate export receipts, contributing over 40 percent of merchandise exports, although much of this reflected re-exports. While gold strengthened foreign exchange inflows, analysts continued to raise questions about domestic value addition and transparency in the sector.
Industry and construction benefited from ongoing infrastructure projects, including roads, energy and oil-related investments. Manufacturing showed gradual recovery, aided by improved electricity supply. Services, particularly transport, telecommunications, trade and financial services, remained the largest contributor to GDP, reflecting urbanisation and growing domestic demand.
Budget pressures
Fiscal policy in 2025 was shaped by the need to support growth while managing rising debt service obligations. The FY2025/26 national budget prioritised agro-industrialisation, human capital development, infrastructure and science and technology, aligning with government’s medium-term growth agenda.
Despite these priorities, fiscal space remained tight. CSBAG data show that public debt rose to Shs116.2 trillion by June 2025, equivalent to about 51.3 percent of GDP. Debt servicing absorbed more than 30 percent of domestic revenues, crowding out spending on social services.
Mukunda warned that debt had become not only a macroeconomic issue but a service delivery challenge. “For every shilling collected, a growing share is going to interest payments instead of health, education and agriculture,” he noted, calling for stronger public financial management and restraint in supplementary spending.
External environment and financing shifts
Uganda’s external position improved modestly in 2025, supported by export growth and stable remittance inflows. Foreign exchange reserves remained adequate, according to the Bank of Uganda. The World Bank partially resumed concessional financing during the year after a previous freeze, committing funds for infrastructure, education, health and social protection.
However, global aid retrenchment and trade uncertainties exposed Uganda’s vulnerability to external shocks. CSBAG noted that Uganda’s narrow export base, dominated by gold and coffee, leaves the economy exposed to global price swings and protectionist measures.
Outlook beyond 2025
As 2025 closes, Uganda enteres 2026 with a stable macroeconomic platform but heightened risks. Election-year spending pressures, rising debt service, youth unemployment and climate-related shocks pose significant challenges. At the same time, the anticipated start of oil production presents both an opportunity and a test of fiscal discipline.
The Bank of Uganda, however, has signalled its readiness to maintain a firm monetary stance to keep inflation within target. Fiscal authorities, meanwhile, face the more complex task of balancing political demands with economic prudence.
