KAMPALA, April 23, 2025 – Uganda’s economy continues to demonstrate resilience in the face of global headwinds, according to the latest Performance of the Economy Monthly Report released by the Ministry of Finance, Planning, and Economic Development [MOFPED] for March 2025. The report highlights sustained improvements in economic activity, a significantly narrowed trade deficit, and stable inflation, painting an optimistic picture of the country’s economic trajectory.
Real sector developments
The report shows that economic activity picked up momentum in March, with the Purchasing Managers’ Index [PMI] rising slightly to 52.9, up from 52.6 in February. This reflects an improvement in business conditions, underpinned by stronger output, a rise in new orders, and continued consumer demand.
“Business sentiment remained upbeat, especially in sectors like agriculture and wholesale trade,” the Ministry stated, although the Business Tendency Index [BTI] showed a slight dip to 58.41, from 59.39 the previous month.
Inflation remained well below the Bank of Uganda’s 5.0 percent target. Annual headline inflation eased to 3.4% in March, down from 3.7 percent in February, largely due to lower prices in transport, accommodation, and non-food items. Food crop inflation also fell to 3.1 percent, thanks to improved supply conditions.
Financial sector developments
The Ugandan Shilling appreciated by 0.3 percent against the US Dollar, trading at an average mid-rate of Shs 3,667.63/USD in March. This was supported by stronger dollar inflows, including portfolio investments, remittances, and foreign direct investment, particularly in the oil sector.
Despite currency strength, lending rates for Shilling-denominated loans increased to 18.76 percent in February from 16.50 percent in January, reflecting higher lending to riskier borrowers in trade and personal loan categories. Foreign currency lending rates declined marginally to 8.30 percent.
Govt securities
Government mobilised Shs 1.85 trillion through securities in March, with Shs 715.80 billion from Treasury Bills and Shs 1.13 trillion from Treasury Bonds. Of this, Shs 1.36 trillion was directed towards budget financing, and Shs 487.23 billion was used to refinance maturing securities.
External sector developments
One of the standout metrics in the report was Uganda’s trade deficit, which narrowed sharply by 83.7 percent to USD 44.26 million in February 2025, down from USD 271.10 million the previous year.
“Export earnings rose by 32.3 percent to reach USD 843.05 million, buoyed by a surge in coffee exports, which more than doubled to USD 167.68 million,” the report noted. Cocoa and tobacco also recorded notable growth.
The import bill decreased by 2.3 percent year-on-year to USD 887.31 million. The Middle East remained Uganda’s leading export destination, accounting for 32.9 percent of total exports, followed by the East African Community [25 percent] and the European Union [19.5 percent].
Fiscal sector developments
Government posted a gross operating deficit of Shs 811.13 billion in March, above the planned Shs 513.23 billion, due to revenue shortfalls and unplanned expenditures.
Tax revenue collections were Shs 92.16 billion below target, largely due to lower-than-expected receipts from petroleum duty and consumption taxes on products such as beer and sugar.
Meanwhile, total government spending reached Shs 3.16 trillion, exceeding projections due to increased compensation for public employees and grants to local governments. However, spending on non-financial assets fell short, reflecting delays in project execution.
East African Community developments
Uganda was the only EAC member state to register currency appreciation against the US Dollar, with its regional peers seeing depreciations. Inflation in Uganda declined, contrasting with upward trends in Kenya, Tanzania, and Rwanda.
However, Uganda’s trade balance with EAC partner states turned negative in February, shifting to a deficit of USD 16.92 million, compared to a surplus of USD 12.2 million in January.
“In February 2025, Uganda traded at a deficit of USD 16.92 million with the rest of the EAC partner states,” the report said. “This was primarily due to a 10.3 percent decline in export earnings and a 2.3 percent increase in imports from the region.”
Despite this, Uganda maintained trade surpluses with South Sudan, Rwanda, Burundi, and the Democratic Republic of Congo [DRC].
The Ministry concluded that while the economy is on a stable and encouraging path, marked by growth in exports, currency strength, and inflation control, but challenges such as fiscal pressures and rising borrowing costs still need addressing.
“The March 2025 report underscores Uganda’s resilience in the face of global and regional economic volatility,” said a senior official from the Ministry. “But to sustain this progress, targeted policy action is needed, particularly in revenue collection, project execution, and access to affordable credit.”
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