The Ugandan economy recently experienced an impressive growth. According to Uganda’s finance ministry, the nation’s yearly and monthly trade deficits with the rest of the world have decreased as a result of rising export revenues that have more than offset rising import costs.
Uganda’s GDP growth has been averaging 6% per year since 2017, and this growth has been driven by a number of important factors, which include a strong agricultural sector, which accounts for about 25% of GDP and employs over 70% of the workforce; a growing services sector, which accounts for about 45% of GDP and is dominated by tourism, telecommunications, and financial services; increased investment in infrastructure, such as roads, railways, and power plants; and rising foreign direct investment, particularly in the oil and gas sector.
Uganda Balance of Trade
Source: Bank of Uganda
According to Business Insider Africa, the finance ministry’s monthly report on the state of the economy for July 2023 states, “Between May and June, the merchandise trade deficit narrowed by 12.3% from $82.08 million to $247.43 million. Year-on-year, the merchandise trade deficit narrowed by 32.2% from 365.11 million in June 2022 to 247.43 million in June 2023.”
This decrease in the trade deficit in Uganda has been an ongoing process. According to the World Bank, Uganda's trade deficit shrank to $1.5 billion in 2022, down from $2.1 billion in 2021. This was due to a surge in exports, which grew by 25% in 2022. The main exports of Uganda are coffee, tea, copper, and fish.
It is essential to comprehend that the shrinking of the trade deficit of the Ugandan economy is based on the strengthening of the Ugandan shilling against the dollar; the rise in commodity prices, which boosted exports of coffee, tea, and copper; the growth of the manufacturing sector, which has created new export opportunities; and the government’s focus on export promotion, through initiatives such as the Export Development and marketing Agency (EDMA).
The shrinking trade deficit and the surge in exports are a positive sign for Uganda's economy. This suggests that the country is becoming more competitive in the global market and that its exports are becoming more diversified. This is likely to continue to support economic growth in the years to come.
The surge in exports is a positive sign for Uganda's economy, as it suggests that the country is becoming more competitive in the global market. This is likely to continue to support economic growth in the years to come.