Uganda’s economy has great potential. Endowed with significant natural resources, including ample fertile land, regular rainfall, and mineral deposits, it appeared poised for rapid economic growth and development at independence. However, chronic political instability and erratic economic management produced a record of persistent economic decline that left Uganda among the world’s poorest and least-developed countries.
Since assuming power in early 1986, Museveni’s government has taken important steps toward economic rehabilitation. The country’s infrastructure–notably its transportation and communications systems that were destroyed by war and neglect–is being rebuilt. Recognizing the need for increased external support, Uganda negotiated a policy framework paper with the IMF and the World Bank in 1987. It subsequently began implementing economic policies designed to restore price stability and sustainable balance of payments, improve capacity utilization, rehabilitate infrastructure, restore producer incentives through proper price policies, and improve resource mobilization and allocation in the public sector. Uganda’s macroeconomic policies are sound and contributed to an 8.6% growth rate in fiscal year 2007-2008, compared to 7% in FY 2006-2007. Inflation ran at 240% in 1987 and 42% in June 1992, and was 5.1% in 2003. It bounced up to 7.7% in 2007 and 12% in 2008 and portions of 2009, well above the government’s annual target average of 5%, as food prices rose.
Investment as a percentage of GDP was 17% in 2006/2007 compared to 15.7% in 2002/2003. Private sector investment, largely financed by private transfers from abroad, was 20% of GDP in 2006/2007. In the same year, gross national savings as a percentage of GDP fell to an estimated 12%, from 13% the previous fiscal year. The Ugandan Government has worked with donor countries to reschedule or cancel substantial portions of the country’s external debts.
Agricultural products supply nearly all of Uganda’s foreign exchange earnings, with coffee (of which Uganda is Africa’s second leading producer) accounting for about 23% and fish 7% of the country’s exports in 2007/2008. Exports of non-traditional products, including apparel, hides, skins, vanilla, vegetables, fruits, cut flowers, and fish are growing, while traditional exports such as cotton, tea, and tobacco continue to be mainstays. Significant discoveries of oil in the Albertine Rift in western Uganda in 2008 pose both a major challenge and a major opportunity for Uganda’s economy and development. As of late 2009, the private sector had invested considerably in the oil sector, but production had not yet begun pending further feasibility studies on the funding and construction of the necessary infrastructure to support the industry.
Most industry is related to agriculture. The industrial sector has been rehabilitated and resumed production of building and construction materials, such as cement, reinforcing rods, corrugated roofing sheets, and paint. Domestically produced consumer goods include plastics, soap, cork, beer, and soft drinks.
Uganda has about 45,000 kilometers (28,000 mi.) of roads, of which 10,000 (6,213 miles) kilometers are main roads and 35,000 kilometers (21,747 miles) are feeder roads. Only 3,000 kilometers (1,864 mi.) are paved, and most roads radiate from Kampala. The country has about 1,350 kilometers (800 mi.) of rail lines, but most of it is not currently in use. A railroad originating at Mombasa on the Indian Ocean connects with Tororo, where it branches westward to Jinja, Kampala, and Kasese and northward to Mbale, Soroti, Lira, Gulu, and Pakwach. Uganda’s important road and rail links to Mombasa serve its transport needs and also those of its neighbors–Rwanda, Burundi, and parts of Congo and Sudan. An international airport is at Entebbe on the shore of Lake Victoria, some 32 kilometers (20 mi.) south of Kampala.