Uganda’s economy grows to 6.3% in FY2024/25 as exports surge and inflation stays low
Aerial view of Kampala city: Photo: The Observer
Uganda’s economy continues on an upward trajectory, registering a robust growth rate of 6.3% for the Financial Year 2024/25, according to the latest Performance of the Economy report released by the Ministry of Finance, Planning and Economic Development.
The report, covering the month of June 2025, highlights improved economic indicators across multiple sectors including exports, inflation control, private sector activity, and fiscal performance.
Inflation remains under control despite food price pressures
Annual headline inflation rose slightly to 3.9% in June, up from 3.8% in May 2025. This was primarily driven by increased prices of essential food items such as matooke, dry beans, and passion fruits. Nonetheless, the government maintained inflation well within its 5% policy target, with annual headline inflation averaging 3.5% for the entire financial year.
Core inflation excluding volatile food and energy prices stood at 4.2%, reflecting overall price stability despite food-related spikes.
Private Sector and Economic Activity Show Positive Momentum
High-frequency indicators signal continued growth in economic activity:
- The Composite Index of Economic Activity (CIEA) rose by 0.3% in May, reaching 178.58.
- The Purchasing Managers’ Index (PMI) remained strong at 55.6 in June, staying well above the neutral 50-mark and reflecting growing business confidence and rising customer demand.
- The Business Tendency Index (BTI) also held steady at 59.17, showing optimism among business leaders, especially in manufacturing, construction, and wholesale trade.
Exports drive trade balance recovery
Uganda’s trade deficit narrowed by 15.2% year-on-year to USD 110.85 million in May 2025. The positive shift was largely due to a significant 36.8% surge in export earnings, reaching USD 1.2 billion, up from USD 876 million in May 2024.
Key export performers included:
- Coffee: Earnings rose by 91.6% year-on-year, fueled by better volumes and international prices.
- Cocoa: Export volumes more than tripled from 3,010 tons to 9,867 tons, with revenue reaching USD 108.6 million.
- Other contributors included tea, fish, beans, fruits, and vegetables.
Imports also grew by 30.1%, totaling USD 1.31 billion, driven by increased demand for petroleum products, machinery, and food items.
Shilling strengthens amid strong dollar inflows
The Ugandan Shilling appreciated by 1.3% against the US Dollar, trading at an average of UGX 3,605.84/USD in June. This trend was attributed to increased export earnings, foreign direct investment, and remittances.
Fiscal pressures persist Despite Strong Tax Collection
Despite collecting UGX 4.23 trillion in taxes 111.7% of the target, government operations ended the month with a UGX 44.49 billion fiscal deficit, mainly due to shortfalls in grants and non-tax revenue, as well as higher-than-expected spending.
Notably:
- Employee compensation exceeded projections, reaching UGX 530.31 billion.
- Non-financial asset acquisitions (such as infrastructure investments) rose to UGX 1.41 trillion, reflecting a 138.9% performance above the monthly target.
Resilience with caution
With core economic indicators pointing upward, Uganda is poised for continued recovery and expansion. However, pressures from rising food prices and increased government spending may require careful policy balancing in the months ahead.
For more in-depth analysis, access the full Ministry report at mepd.finance.go.ug.
