Economy posts positive results despite negative predictions

The country’s economic performance got a positive nod in the second quarter of the year, between April and June 2024, expanding by 6.6 percent, despite predictions by analysts that recovery was likely to nosedive, at the start of the year.
The Permanent Secretary in the Ministry of Finance, Planning, and Economic Development, who is also the Secretary to the Treasury, Mr Ramathan Ggoobi, said the high frequency indicators of economic activity show improvements by the private sector in conducting business. 
“The Composite Index of Economic Activity (CIEC) grew to 166.63 in August 2024 from 166.03 in July 2024. Similarly, both the Purchasing Managers Index (PMI) and the Business Tendency Index (BTI) were recorded at 54.2 and 57.8 respectively in September 2024,” Mr Ggoobi said at the ministry’s office in Kampala yesterday.
Mr Ggoobi said this was above the threshold of 50, implying that the business health and sentiments in the private sector are positive and show improvements in the level of economic activity.
“With government’s continued investment in the ATMS (Agriculture, Tourism, Manufacturing, and Science) to grow the economy ten-fold and other strategic interventions, the economy is poised to grow between 6 and 6.5 percent this financial year. In the subsequent years, economic growth is projected to be higher,” he said.
Mr Ggoobi said the Ugandan shilling has maintained relative stability against the US dollar (USD) with a gradual appreciation since March 2024 except for August 2024 when it slightly depreciated. This stability has been partly supported by increased export revenues, particularly from coffee, despite strong corporate demand for financing imports and other obligations.
“In September 2024, the Ugandan Shilling appreciated by 0.33 percent against the US dollar to an average mid-rate of Shs 3,711.31 per US dollar compared to an average mid-rate of Shs3,723.65 per US dollar in August 2024,” he said.
As of August 2024, Uganda’s merchandise trade deficit narrowed to $314.1 million from $342.8 million in August 2023. This was driven by an increase in export receipts, which more than offset the increase in the import bill.
Total exports in August 2024 amounted to $789.58 million, implying a 17.9 percent growth on the $669.69 million the same month last year. Coffee remains one of Uganda’s major exports, increasing by 82.2 percent from $121.64 million to $221.63 million in August 2023 and 2024, respectively.
Remittances for FY2023/2024 amounted to $1.292 million. This performance marks the return to pre-Covid-19 remittance numbers as the global economy recovers from the shocks experienced over the past few years.
During the period, the Foreign Direct Investment (FDI) inflows to Uganda for FY 2023/24 reached a record high of $3.034 million, an increase from $2.950 million recorded in FY 2022/2023. FDI inflows have increased steadily year-on-year, largely reflecting the ongoing activity in the oil and gas sector as the country prepares for its first oil in a couple of years.
As of October 15, the government had issued domestic debt amounting to Shs6.825 trillion. Of this, Shs3.475 trillion was for refinancing maturing debt (roll-over) and Shs3.350 trillion was for financing general budget activities (net domestic financing/NDF).
The issuance so far represents 32 percent of the issuance target for FY2024/2025. There was a marginal frontload of domestic debt issuance into the first half of the fiscal year to cater for government financing requirements and at the same time smoothen the seasonality reduction of domestic revenues in Quarter One.
“Looking ahead, the inflation outlook is good and the Central Bank in response reduced the CBR from 10 percent to 9.75 percent on October 7. We, therefore, expect interest rates on government securities to be steady with the possibility of reduction. We shall not borrow at any cost; we shall borrow only when the cost is affordable. I reiterate that the government debt position is sustainable and within internationally recognised benchmarks,” he said.
For this Quarter (October to December 2024), Mr Ggoobi said Shs15.99 trillion has been released; wages and salaries taking Shs1.991 trillion; while non-wage recurrent expenditure has got Shs281.73 billion for pension and gratuity; and Shs145.32 billion for local governments,” he said.