Uganda registered a foreign direct investment (FDI) growth of 25.4 percent in the first quarter (July to September) of the financial year 2024/25, compared to the same quarter of the previous financial year.
Releasing the latest data on the state of the economy, the Permanent Secretary and Secretary to the Treasury in the Ministry of Finance, Planning and Economic Development, Ramathan Ggoobi, attributed the strong performance to political stability, macroeconomic conditions, market size, and institutional quality in Uganda that have improved, making it more attractive for foreign investors.
Uganda’s participation in regional integration efforts, like the Africa Continental Free Trade Agreement, has enhanced its market potential, contributing to higher FDI inflows.
Government policies aimed at lowering interest rates, increasing real wages, and devaluing the domestic currency have positively impacted FDI by making investment more feasible and profitable.
On the other hand, Uganda’s gross domestic product (GDP) grew by 6.7 percent during the first quarter of the financial year 2024/25 compared to the 5.6 percent recorded in the same period of the previous financial year.
The main drivers were:
- Food crop production (agriculture);
- Agro-processing;
- Construction (industry);
- Wholesale trade; and
- Transport activities (services)
Economic outlook:
- Uganda’s economy is economy is projected to grow between 6 – 6.5 percent in the short to medium term.
- Inflation is projected to remain within the 5 percent target of the Central Bank (Bank of Uganda).
- The foreign exchange rate is anticipated to remain stable, supported by continued inflows of FDI into the Oil and Gas sector.
- On the fiscal front, domestic revenues are projected to perform at 100 percent.
External sector:
- Uganda’s total export earnings in the first quarter of the financial year 2024/25 amounted to 2.262 billion dollars, translating to a growth of 21.8 percent compared to export earnings of 1.857 billion recorded for the first quarter of the financial year 2023/24.
- Uganda’s import bill also grew to 3.161 billion dollars in Q1 FY 2024/25 compared to 2.746 billion dollars in the first quarter of the previous year.
- As a result of the higher increase in imports compared to exports (nominally), the trade deficit between Uganda and the rest of the world widened by 1.2 percent from 888.38 million dollars in the first quarter of the financial year 2023/24 to 898.66 million dollars in the first quarter of the 2024/25 financial year.
Inflation:
Ggoobi said: “Whereas headline inflation increased to 3.3 percent in December 2024, up from 2.9 percent in November, driven mainly by increased demand during the festive season, the overall inflation remains subdued and within the policy target of five percent, thanks to close coordination of fiscal and monetary policies”.
Exchange rate:
In December 2024, the Shilling appreciated by 0.4 percent having traded at an average mid-rate of 3,664.08 shillings per U. S. dollar, compared to an average mid-rate of 3,678.65 shillings per U. S. dollar in November 2024.
The reasons for the appreciation are:
- Increased remittances inflows during the month as Ugandans working abroad sent funds back to their families for the festive season; and
- Increased Foreign Direct Investment especially to the oil sector, amongst others.
Diaspora remittances:
Remittances for the first quarter of financial year 2024/25 were 389.06 million dollars compared to 360.13 million dollars recorded for the same quarter of the previous financial year, implying growth of eight percent.
Remittances directly increase the income of recipient households, thereby reducing poverty. In Uganda, remittances have helped lower poverty by nearly 11 percentage points.
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