Uganda’s economy strengthens in April amid rising inflation and export growth
The Composite Index of Economic Activity [CIEA] also ticked up to 170.6 in March, reflecting broad-based growth across agriculture, industry, and services
KAMPALA, May 23, 2025 –– Uganda’s economy showed continued signs of recovery in April 2025, supported by stronger business activity, robust export growth, and stable financial conditions, according to the Ministry of Finance’s latest Performance of the Economy Monthly Report.
According to the report, the Purchasing Manager’s Index [PMI] rose to 55.3 in April from 52.9 in March, indicating improved private sector conditions, underpinned by rising consumer demand, new orders, and increased output.
The Composite Index of Economic Activity [CIEA] also ticked up to 170.6 in March, reflecting broad-based growth across agriculture, industry, and services. Business confidence remained strong, with the Business Tendency Index [BTI] climbing to 59.32, driven by optimism in the construction, manufacturing, and wholesale trade sectors.
“Private sector confidence is clearly on the rise. The data show that firms are seeing stronger demand and ramping up activity in response,” says the report.
Inflation trends
However, the report says inflationary pressures increased slightly as annual headline inflation rose to 3.5 percent in April from 3.4 percent in March, while core inflation accelerated to 3.9 percent, largely due to higher prices for staple foods such as maize and meat, and increased service costs in hotels and restaurants.
Food crop inflation, however, eased to 2.4 percent, and Energy, Fuel, and Utilities [EFU] inflation fell to 0 percent, reflecting lower fuel prices and reduced electricity tariffs.
Stable financial sector
The report mentions Central Bank Rate [CBR] being held steady at 9.75 percent in April by the Bank of Uganda for the seventh consecutive month to anchor inflation expectations. The Ugandan shilling depreciated marginally by 0.04 percent, settling at an average mid-rate of Shs 3,669.18 per US dollar.
Lending rates for shilling loans declined to 17.74 percent in March, down from 18.76 percent in February, while foreign currency loan rates edged up slightly to 8.51 percent.
The government raised Shs 767.55 billion through domestic securities, allocating Shs 452.43 billion to refinance maturing debt and Shs 315.12 billion for its budgetary needs.
Export boom narrows trade gap
Uganda’s merchandise exports surged by 40.6 percent year-on-year to US$ 899.1 million, buoyed by increased revenues from coffee, cocoa, mineral products, sugar, and fish. Coffee exports alone jumped 206.8 percent, driven by higher global prices and volumes.
Imports rose by 7.3 percent to US$ 1.11 billion, primarily due to government project imports and private sector demand. This led to a 46.3 percent year-on-year reduction in the trade deficit, which stood at US$ 213.63 million in March.
“The impressive growth in coffee and cocoa exports is a promising sign for Uganda’s balance of trade,” says the report. “However, rising imports have led to a slight widening of the monthly trade gap.”
The Middle East remained Uganda’s top export market, accounting for 37.1 percent of exports, followed by the East African Community [EAC] at 20.1 percent.
Fiscal pressures and EAC trends
Despite economic gains, Uganda recorded a fiscal deficit of Shs 1.81 trillion, overshooting projections by nearly Shs 600 billion. Revenue shortfalls, particularly in international trade taxes, and overspending contributed to the gap.
Regionally, inflation rose in most EAC states. Uganda, Kenya, Rwanda, and South Sudan all recorded upticks, attributed to higher food and beverage prices. Uganda’s inflation rose to 3.5 percent, Kenya’s to 4.1 percent, Rwanda’s to 6.3 percent, and South Sudan’s to 16 percent.
Conversely, inflation declined in Tanzania and Burundi due to lower food costs. The Ugandan Shilling, along with other regional currencies, depreciated slightly against the US dollar, mirroring global currency trends.
Uganda’s trade deficit with EAC partners widened to US$ 152.97 million, driven by a 46.5 percent rise in imports and a 12.3 percent drop in exports. Trade surpluses were recorded with DR Congo, South Sudan, and Rwanda, while deficits persisted with Kenya, Tanzania, and Burundi.
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