Uganda’s export sector has seen impressive growth in the first quarter of the 2024/25 financial year, with total export earnings reaching Shs 8.389 trillion (USD 2.262 billion), marking a 21.8% increase from Shs 6.948 trillion (USD 1.857 billion) in the same period the previous year. This positive performance was highlighted by Ramathan Ggoobi, Permanent Secretary and Secretary to the Treasury in the Ministry of Finance, Planning, and Economic Development, during the release of the third-quarter expenditure updates.
Key Drivers of Export Growth
The surge in export earnings was largely driven by Uganda’s leading export commodity—coffee. Coffee exports experienced significant growth in both volume and international prices. In addition to coffee, other key exports that contributed to this rise included mineral products, flowers, sesame (simsim), and tobacco. All these commodities outperformed their counterparts from the previous year, showcasing Uganda’s expanding presence in international markets.
Ggoobi commented, “This growth is a testament to our deliberate efforts to diversify export products and enhance the competitiveness of Uganda’s goods on the international market.”
Impact on Uganda’s Economy
The increase in export revenue is seen as a vital boost to Uganda’s economy. One of the key benefits is the strengthening of the country’s foreign exchange reserves, providing greater stability to the Ugandan shilling. This, in turn, is expected to cushion the economy against external shocks.
Moreover, the growth in exports is paving the way for greater job creation, particularly in the agricultural and manufacturing sectors, which are central to Uganda’s economic development. This positive trend also contributes to an improved trade balance, which is essential for ensuring sustainable growth in the long run.
Challenges: Rising Import Bill and Trade Deficit
However, despite the strong export performance, Uganda faced an increase in its import bill, which rose to Shs 11.829 trillion (USD 3.161 billion) in Q1 FY 2024/25, up from Shs 10.245 trillion (USD 2.746 billion) in the same period of FY 2023/24. This increase was driven by higher imports of machinery, electronics, and industrial inputs.
As a result, Uganda’s trade deficit widened by 1.2%, from Shs 3.290 trillion (USD 888.38 million) in Q1 FY 2023/24 to Shs 3.388 trillion (USD 898.66 million) in Q1 FY 2024/25. Ggoobi pointed out that the expanding trade deficit underscores the need to focus on import substitution industries, which would help reduce Uganda’s reliance on foreign goods.
Foreign Direct Investment (FDI) Growth
In addition to the strong export performance, Uganda recorded a notable 25.4% increase in Foreign Direct Investment (FDI). FDI reached Shs 2.974 trillion (USD 799.46 million) in Q1 FY 2024/25, up from Shs 2.390 trillion (USD 637.58 million) in the same period last year. Ggoobi attributed this rise in FDI to growing investor confidence in Uganda’s economy, adding that the country is increasingly seen as a regional investment hub.
“This increase in FDI reflects the growing confidence of investors in our economy and highlights Uganda’s potential as a regional investment hub,” Ggoobi remarked.
Outlook for Uganda’s Economy
Experts remain optimistic about Uganda’s economic outlook, citing the rise in both export earnings and FDI as key indicators of the country’s growing economic resilience. The government’s focus on diversifying exports, promoting local manufacturing, and reducing dependence on imports will be crucial to sustaining this growth. These strategies are seen as vital for building a robust economy that can weather global economic challenges and provide long-term prosperity.
