Uganda Economy

Uganda Economy

Subchapters:

  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

According to cheeroutdoor.com, Uganda’s economy is based on agriculture and coffee is the main export. Uganda also has small deposits of copper, gold and other minerals. Ugandan industry is underdeveloped. Major industries include sugar processing, brewing, tobacco, textiles, and cement and steel production. Uganda’s main export partners are: Kenya, the United Arab Emirates, the Democratic Republic of the Congo, Rwanda and Italy. Major export commodities include coffee, fish and fish products, tea, cotton, flowers, horticultural products and gold. Uganda’s main import partners are China, India, United Arab Emirates, Kenya, Japan, Saudi Arabia, Indonesia and South Africa. Major import commodities include capital equipment, vehicles, petroleum, medical supplies, and grains.

Table from MOP + additionally balance of payments, indebtedness/GDP.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 5.9 -1.4 5.1 5.8 6.2
GDP/population (USD/PPP) 2,130.00 2,240.00 2,160.00 2,280.00 2,450.0
Inflation (%) 2.9 3.8 2.2 3.8 4.6
Unemployment (%) 1.9 2.8 ON ON ON
Export of goods (billion USD) 4.1 4.3 4.5 5 5.1
Import of goods (billion USD) 7.7 7.4 7,8 8.3 8.7
Trade Balance (Billion USD) -2.8 -2.6 -3 -3.2 -3.5
Industrial production (% change) 5.3 1.1 5.1 7.2 7,8
Population (millions) 44.3 45.7 47 48.3 49.6
Competitiveness ON ON ON ON ON
OECD export risk 06.VII 06.VII 06.VII ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -9.2
Public debt (% of GDP) 52.8
Current account balance (billion USD) -3.7
Taxes 2022
AFTER ON
F.O ON
VAT ON

In 2021, the Ugandan economy was recovering from the January presidential election, which was again won by President Museveni. The restart of the economy in 2021 was not helped by the extension of anti-Covid measures, such as a strict curfew from 7pm to 5.30am and closed schools. Although the government called for vaccination, the country was struggling with a vaccine shortage. International firms such as Shoprite and Africell left the country during the pandemic, air links were curtailed and this only added to the pressure on the government to relax anti-covid measures.

The country’s debt has increased during the pandemic, reaching 50% of GDP in 2022. Tax revenue has decreased and the overall performance of the economy is below the level of the time before COVID 19. The government promises more investment in transport, especially in the construction of roads, for which it would like to release a record amount of about billion USD. In 2022, the construction of the largest Karuma hydroelectric plant with a capacity of 600MW will also begin, which will sell surplus energy to Kenya and South Sudan.

Data revenue from the major telcos – MTN and Airtel – account for about a quarter of Uganda’s total income. The government has introduced a new 12% tax on internet services in 2021, which could hurt a lucrative segment of the telco industry. Experts expect a temporary drop in internet usage as a response from users.

Until November 2021, trade relations between Uganda and Kenya were marred by disagreements over exports, particularly sugar and milk. At the end of 2021, there were trade negotiations that partially helped to improve the atmosphere.

Banking system

Banking supervision in Uganda falls under the Central Bank of Uganda (BoU). The BoU was established in 1966. In addition to banking supervision, the BoU is also responsible for promoting macroeconomic stability in the country. 62% of Uganda’s population does not have access to financial services. The number of people who have bank accounts is only 4 million or only 33% of the 12 million people who could have bank accounts. The ratio of savings to GDP is thus still low and reaches 16% of GDP. The loan-to-GDP ratio is also low, accounting for only 11.8% of GDP.

Yet the banking sector in Uganda has seen steady growth in assets over the years. By the end of 2019, the sector’s total assets had grown to Ugx 3billion, representing an average total asset per regulated bank of Ugx 1.28 billion. Bank assets thus increased by 251% over the past 16 years. Most of the country’s banks have foreign ownership, including major international institutions such as Stanbic, Citibank, Barclays and Standard Chartered. Foreign banks are then complemented by local banks such as DFCU Bank, Crane Bank and Cerudeb. While the size of the financial sector has grown, bank performance has declined significantly, with many financial institutions showing undercapitalization, low asset quality, higher bank losses and lower returns on investment. The number of non-performing loans is close to 6%, with non-performing loans extending into every economic segment.

Tax system

Uganda derives most of its tax revenue from income taxes and value added tax. Other taxes are, for example, real estate tax or consumption tax. However, tax collection is unable to cover fiscal expenditure and the Ugandan public budget is dependent on foreign development cooperation.

Income tax of FO residents, 10-30%

Basis – A person resident in Uganda is liable to tax on their worldwide income.

Taxable Income – Income includes income from employment, profits from the exercise of a trade, business or profession; capital gains; dividends; interest; and non-monetary benefits, advantages or facilities obtained through earnings.

PO income tax – 30%

Basis – For all companies – income arising in or derived from Uganda (ie Ugandan income) is taxable. Small businesses are taxed based on their turnover.

Taxable Income – Taxable income is the gross income earned during the tax year, minus the total allowable deductions. Gross income includes both business and property income.

Value Added Tax – 18%

Taxable transactions – VAT is levied on the sale of goods and provision of services and on the importation of goods and services without exception. Zero-rated goods and services include specified imported goods and services, used mainly in agriculture, health and education.

Expected developments: Uganda’s public finances are and will remain in deficit for the next two years. A reduction in tax rates cannot be expected.

Uganda Economy