WHY MUSA SHOULD CARE ABOUT BOU’S JULY INDICATORS

Every morning at 5:30am, long before the sun melts the mist off the hills of Kisasi, Musa swings a leg over his boda boda and starts the day. But unlike a few months ago, his first trip isn’t for a passenger. It’s a detour. He rides nearly several kilometres down the Kisaasi-Kyanja road to a  roadside fuel pump offering petrol at UGX 4,950 a litre.

It’s not Total. It’s not Shell. The fuel might be mixed with paraffin, and sometimes it stutters in his engine. But at sh350 less per litre than the pump price at branded stations, Musa says he has no choice.

“The savings are small, but in this business, 1,000 shillings can be your profit or loss for the day,” he explains.

Musa hasn’t read the Bank of Uganda’s (BOU) July 2024 indicators, or ever. But those numbers explain exactly why he’s making longer, riskier trips just to fuel his bike.

Start with the petrol price: just above sh5,300 per litre in Kampala’s mainstream stations. It's driven by high global crude prices, a strong dollar, and hefty local taxes. And unlike salaried professionals who can absorb a few hundred shillings more, people like Musa feel it immediately. The extra cost isn’t just eating into his daily earnings—it’s forcing him into trade-offs. Shorter rides? No thank you. Picking up passengers off-route? Absolutely—especially if they help him hit his sh40,000 daily target.

And while the BOU has held the Central Bank Rate at a steady 10.25 percent to tame inflation, it also means borrowing remains costly. Musa, like many in the informal sector, relies on short-term digital loans or SACCO credit. With commercial lending rates averaging 19.7 percent in July and mobile lenders charging effective interest rates several multiples of that, debt is more a trap than a bridge...

Credit is not only expensive—it’s scarcer too.

Private sector credit growth slowed to under nine percent year-on-year in July, down from pre-pandemic levels of 14–16 percent. Lenders remain cautious. Many are still managing bad loans from the COVID-era restructuring wave and are wary of high-risk borrowers. Trade, personal loans, and even agriculture—once stable bets—have seen reduced disbursements. That’s a squeeze on exactly the sectors that employ the likes of Musa and his peers.

Yet, the broader macro picture offers glimmers of resilience.

The Uganda shilling strengthened slightly to sh3,755 per dollar from sh3,778 in June. Modest as it may seem, it helps moderate the cost of imported fuel, spare parts, and other essentials. Musa might not know it, but a weaker shilling would have pushed even his sh4,950 fuel closer to sh5,500.

Behind the shilling’s stability is a healthy stash of foreign exchange reserves—now above $4.1 billion, or enough to cover 4.5 months of imports. These reserves act like shock absorbers—critical at a time of Red Sea shipping disruptions and geopolitical jitters. They keep inflation in check and the currency steady, even when sentiment swings wildly.

Inflation itself remains within range, with headline inflation at 3.9 percent and core inflation (excluding food and fuel) edging lower to 3.2 percent. But the food crops index tells a more immediate story. Erratic rains and high transport costs pushed food prices higher in July, directly affecting Musa’s lunch bill and his family’s grocery budget.

On the trade front, Uganda’s export engine kept humming. Coffee brought in over $90 million in July, supported by strong global prices. Gold remained the top performer at over $160 million, thanks to its safe-haven demand. Fish exports, especially Nile perch to Europe, continued their recovery, and tea, maize, and sugar held their own.

What’s encouraging is not just the volume, but the market diversification. Uganda is selling more to Asia and the Middle East, reducing its reliance on traditional EAC and COMESA buyers. That diversification helps earn the dollars that keep Musa’s bike moving—even if the fuel isn’t always clean.

Then there’s the silent hero: remittances. Over $130 million came in from Ugandans abroad in July. These flows now rival foreign direct investment and are often more impactful. Chances are, Musa knows someone whose sibling in Doha or Toronto sent back money to cover rent, school fees, or top up a side hustle. In an economy where credit is tight, remittances are informal insurance and working capital rolled into one...

And digital finance? It’s booming. More than sh15 trillion changed hands via mobile money platforms in July. Musa increasingly gets paid by phone, tops up fuel digitally, and avoids the risk of carrying too much cash. For the informal economy, mobile money is now the bloodstream. Fast, traceable, and safe.

So what do July’s indicators really mean for Musa?

They mean he works harder, rides farther, and takes more risks to earn the same. He gambles daily on whether cheaper fuel will clog his engine. His access to credit is narrowing, even as operating costs rise. But they also mean the economic foundations—shilling stability, export earnings, and diaspora support are holding firm, for now.

The challenge is whether these macro wins can trickle down faster than inflation eats into earnings. Whether a stronger shilling can translate into lower fuel costs. Whether export dollars and remittances can open credit channels or drive real demand.

Until then, Musa will keep riding—past the big stations, past the safe pumps, into the lesser-known corners of the city chasing margins the economy says he shouldn’t have to fight for.

That’s the real economy, beneath the spreadsheets. Where the duck is paddling hardest.

pbusharizi@gmail.com

X @pbusharizi

UGANDA’S STUBBORN DEVELOPMENT PARADOX

In 2013, a piece titled “Ugandans are rich but cash poor”, was published in this column.

It was based on the National Household Survey of the time and a reflection shaped by countless conversations and everyday encounters. It was hard to ignore.

From Kampala to Kabale, people owned land, cows, rentals—even the odd plot in the trading centre,but when a child needed school fees or a medical emergency struck, the scramble for actual cash began. There was wealth, but it was locked away, often in forms you couldn’t easily convert when life demanded liquidity. A country asset-rich, but perpetually broke.

Fast forward a decade, and the story seems—on the surface to have improved.

The recently released Uganda National Household Survey 2023/24 paints a picture of real progress. National poverty has dropped to 16 percent, down from 21.4 percent in 2016/17 and significantly lower than the 24.5 percent that hovered around in the early 2010s. That’s something to celebrate. Even the Gini coefficient, our favourite number for inequality, has eased down from 0.415 to 0.382—a sign that we’re a bit more equal than we used to be, at least in terms of income.

But if you zoom in, if you walk the dusty paths and speak to the people, you realise something sobering: that same old paradox still holds. Just better disguised.

Let’s start with wages. Back in 2013, a median salary in Kampala was around sh200,000—enough to cover rent in a low-end suburb and maybe transport and food for a small family. Ten years later, that number has risen slightly to sh260,000 for urban workers in paid employment. That’s not insignificant. But when you account for inflation, school fees, rising fuel prices, and the cost of milk, the money disappears just as quickly as it lands. Rural areas fare worse. Median wages there remain closer to sh120,000–150,000. In essence, the nominal wage has risen, but its real purchasing power has not kept pace.

And what of financial inclusion, that shiny term we love to throw around at conferences? In 2013, mobile money had just begun its ascent. People were excited—sending and receiving cash was suddenly fast and borderless. But real financial empowerment remained limited. Few had bank accounts. Fewer still could access credit. Fast forward to 2023, and mobile money is now the norm. Formal account ownership has grown too. But here’s the catch: 77 percent of household enterprises still rely on personal savings as startup capital. Access to affordable credit, the kind that turns ideas into income, is still out of reach for most...

Back then, I wrote about how people would own three cows and five acres of land but still fail to raise school fees. That story hasn’t changed. Formalization of wealth is still rare. Land is often unregistered. Titles, too few to go around – less than two million at last count, which is a travesty when seen against the fact that more than 80 percent of Ugandan families own their homes. So the wealth sits there—visible, impressive even—but untapped. Ten years on, the form of wealth is the same, but its utility remains frustratingly limited.

There have been other changes. Food, once consuming over 50 percent of most poor households’ budgets, now accounts for 44.2 percent. That’s progress, modest as it is. Expenditure on housing, electricity and water stands at 15.9 percent—steady, though hardly relieving. These improvements have come, in part, from better infrastructure and cheaper services, but they still leave the average Ugandan living on a knife’s edge. The room for saving, investing, or even affording a modest treat is wafer thin.

Even in education, the signs are mixed. Primary gross enrolment has ticked up from 117 percent in 2016/17 to 120 percent today—still bloated by over-aged learners. Secondary enrolment is better, rising slightly from 30 to 34 percent, but we’re still nowhere near where we need to be. Literacy among adults aged 15 and above has improved from around 70 percent a decade ago to 87 percent, which is one of the few unequivocal wins in this story. Yet, cost is still the second most cited reason why children don’t go to school. Some things never change.

Perhaps most telling is the persistence of regional disparity. In 2013, I hinted at it. Today, the data confirms it. Karamoja’s poverty rate stands at a staggering 74.2 percent. Ankole, on the other hand, is at 3.2 percent. Kampala sits at 1.1 percent. These aren’t just numbers—they’re entire realities apart. When the same country yields both those figures, it begs the question: are we really talking about the same Uganda?

Inequality may be statistically narrowing, but that’s income. Not opportunity. Upcountry, the roads are worse, the schools poorer, the hospitals fewer. And when a child is born into that setup, no Gini coefficient can capture how far behind they’ve started. As I noted in 2013, inequality in Uganda is a structural problem—it’s not just who earns more, but who can do more, access more, live more.

So yes, Uganda is better off today than it was a decade ago. Fewer people are living in extreme poverty. Incomes have inched upward. Financial tools have spread across the map. But the core problem of cash poverty—the inability to access and use money when needed remains deeply embedded. We are richer, statistically. But not necessarily freer.

Uganda is moving. But many are still limping.

THE ROAD TO UGANDA'S PROSPERITY IS PAVED

In Kikaaya, a bustling neighborhood on the northern edge of Kampala, Jack’s life tells a story of transformation.

Ten years ago, Jack, a 45-year-old fruit vendor, navigated a dusty, pothole-riddled path to sell his mangoes and bananas at the local market. The journey was grueling with mud-caked shoes in the rainy season and broken axles on his borrowed bicycle.

“I lost half my stock some days,” Jack recalls, shaking his head. “The road was my enemy.”

Then, in 2015, a paved road sliced through Kikaaya, funded by the Uganda National Roads Authority. Today, Jack’s bicycle is replaced by a boda-boda, his market trips take 20 minutes, and his daily earnings have doubled.

His story isn’t just personal—it’s a window into the profound return on investment (ROI) that paved roads bring to Uganda’s communities.

Jack’s experience mirrors a broader truth: roads are the arteries of Uganda’s economy, carrying 95% percent of freight and 99  percent  of passenger traffic, contributing three percent to our GDP.

But what’s the real economic payoff of paving a kilometer of road? Beyond the tar and gravel, the numbers tell a compelling story of growth, opportunity, and challenges we must confront.

Building a kilometer of paved road in Uganda isn’t cheap. A standard two-lane road costs around $1 million, though prices can balloon to $9.3 million for expressways like Kampala-Entebbe. Terrain, materials, and labor drive these costs, with hilly areas or high-quality asphalt pushing budgets higher.

Maintenance adds another layer—unpaved roads bleed $7,971–$9,165 annually per kilometer, while paved ones, though more durable, demand periodic rehabilitation over their 15-year lifespan.

For Jack, the paved road in Kikaaya meant fewer repair costs for his transport and more reliable deliveries, but the upfront price tag raises a question: is it worth it?

The answer lies in the benefits, both tangible and intangible. Economically, paved roads are game-changers. The OECD estimates infrastructure improvements in Africa can boost GDP growth by 2.2 percent annually.

In Kikaaya, the paved road slashed transport times, cutting fuel and vehicle maintenance costs by 30–50 percent by some estimates. For Jack, this meant lower prices for his customers and higher profits for him.

Across a district, a single kilometer of road serving a region with a $10 million GDP could generate $220,000 in annual economic activity. Add in transport savings of $50,000–$100,000 per kilometer, and the economic ripple effect is clear.

But the ROI isn’t just about dollars and cents.

Social benefits are equally transformative. In Kikaaya, the paved road brought a health center within reach. “My daughter got malaria last year,” Jack says. “Before the road, I’d have carried her on my back for hours. Now, we were at the clinic in 15 minutes.”

Studies back this up: children near good roads in rural Uganda are twice as likely to survive childhood illnesses. Education benefits, too—school attendance in Kikaaya has climbed as students no longer miss classes during rainy seasons.

For women, better roads mean safer travel and access to markets, reducing economic dependence and empowering communities.

Projects like the Uganda Roads and Bridges in the Refugee Hosting Districts emphasize protecting vulnerable groups, adding social value that’s hard to quantify but impossible to ignore.

Let’s crunch the numbers. Assume a $1 million cost per kilometer and annual benefits of $350,000 (combining economic growth, transport savings, and social gains). Over 15 years, with a 5% discount rate, the present value of these benefits is roughly $3.63 million.

Subtract the initial cost, and the net benefit is $2.63 million, yielding an ROI of 263 percent—or 17.5 percent annualized. That’s a return any investor would envy. For lower-cost projects at $500,000 per kilometer, the ROI could hit 25–30 percent annually.

"Even high-cost projects, like the $9.3 million-per-kilometer Kampala-Entebbe Expressway, can justify their price if they unlock massive trade or tourism benefits, though inefficiencies there have sparked debate.

Yet, the road to prosperity isn’t without potholes.

Corruption and poor engineering can inflate costs, eroding ROI. The Uganda National Roads Authority has faced scrutiny for contractor inefficiencies, and maintenance lags can shorten a road’s lifespan. Environmental costs also loom—cement production is carbon-intensive, and without sustainable materials, we’re trading short-term gains for long-term harm. Debt-funded projects, like those backed by China’s Exim Bank, burden taxpayers if benefits don’t materialize.

Jack’s road in Kikaaya was a success, but not every project delivers. So, what’s the way forward?

First, prioritize cost-effective designs. Innovative materials or simpler road specifications could cut costs by 15–30 percent, boosting ROI.

Second, tackle corruption head-on—transparent bidding and accountability can keep budgets in check.

Third, invest in maintenance. The Uganda Road Fund’s fuel levies are a start, but consistent funding ensures roads like Kikaaya’s last their full 15 years.

Finally, measure social benefits rigorously. Health and education gains are real but often undercounted, skewing ROI calculations.

Jack’s story is Uganda’s story. His doubled income, his daughter’s saved life, and his community’s newfound mobility show what’s possible when we pave the way forward. A 263 percent ROI isn’t just a number—it’s markets reached, clinics accessible, and dreams realized. But we must build smarter, maintain diligently, and plan sustainably. Only then will every kilometer of asphalt deliver the prosperity Jack now enjoys in Kikaaya.

For more on Uganda’s infrastructure journey, check the National Development Plan or explore analytics at https://x.ai/api.

 

UGANDA’S ECONOMIC GROWTH IS REAL, BUT LET IT COME WITH DIGNITY

Last week I attended a function in a suburb of Kampala, which when I first visited it 30 years ago was not served by a tarmac road. It has had a paved ring road now for at least 10 years and the difference from the dusty rutted track of those many years ago is so drastic as to make the whole area unrecognizable.

The apartment building bug has not bitten, but the road is now lined with shops, garages and commercial buildings, which front a sprawling residential area. One can say the people of the area have done well for themselves.

The changes in this one place, replicated around Kampala made me take a look back through my blog – of the same name as this column to see whether It captured the changes that have been happening. Slow because we are in the forest of things but dramatic nevertheless.

In 2010, when my blog Shillings & Cents started chronicling Uganda’s journey through the thickets of development, the outlook was cautiously hopeful.

"The economy was growing at around six percent, the national budget had just crossed sh7.5 trillion, and the idea that Uganda could one day hit middle-income status wasn’t laughable—it was just… distant...

Fast forward to 2025 and the budget now stands at a staggering sh72 trillion. The economy has crossed sh250 trillion in GDP. Inflation is tamed – in 2011 it hit a 19 year high of 30 percent. Life expectancy is up. Mobile money is a way of life. The National Social Security Fund (NSSF), once a sleepy bureaucratic entity, has grown into a sh20 trillion financial behemoth. Uganda today is a very different animal from what it was fifteen years ago. And we must say it plainly—we’ve done well to get this far.

Especially when you consider the global context.

Over the past decade and a half, the world has stumbled from one economic crisis to another. The 2010 Eurozone debt crunch, the China slowdown, COVID-19, supply chain disruptions, Russia’s war in Ukraine, and now, tightening global credit conditions. Through it all, Uganda’s economy has remained on its feet—sometimes limping, sometimes jogging but never knocked out.

That resilience deserves more attention than it gets. It hasn’t happened by accident.

For one, Uganda’s economy is far more diversified today than it was in the early 2000s. We’re no longer clinging desperately to coffee and copper. Agriculture still plays a major role, but now construction, services, ICT, and even oil and gas are in the mix. There are young Ugandans writing code, exporting crafts on Etsy, and building businesses in fields their parents never imagined. From Gulu to Mbarara, the quiet hum of commerce has spread.

And we’re more regionally plugged in than ever before. South Sudan is now one of our top export destinations. Congolese buyers are regulars in downtown Kampala. Our traders, manufacturers, and transporters are slowly embedding Uganda into the heart of the East African economic engine. This regional integration has created a cushion against global shocks. When the West sneezes, we no longer catch pneumonia quite as quickly.

Add to that the revolution in financial inclusion

. Mobile money has changed everything. What started as a basic platform to send and receive cash is now a full-blown ecosystem: payments, loans, savings, insurance, and even investment products all on a phone. People who’ve never seen the inside of a bank now manage their daily finances digitally. Informal traders, boda riders, market women—millions of Ugandans are now part of a financial system they were previously excluded from. That alone has unlocked trillions of shillings in dormant capital.

The growth in personal savings is also encouraging. The NSSF has grown exponentially, both in member numbers and assets under management. It is now one of the largest institutional investors in East Africa, helping fund roads, real estate, and industrial parks. And unlike many state agencies, it has—mostly stayed clean and efficient.

So yes, Uganda has made undeniable progress. The share of the population living below the poverty line has fallen, though stubborn regional inequalities remain. Life expectancy is over 63, up from 53 in 2010. More mothers give birth in health centres. More children survive to age five. More of them go to school. These are not statistics—they are lived improvements.

And yet. And yet.

Despite all the praise, all the ribbon-cuttings, all the budget increases, Uganda’s development journey still suffers from a deep malaise: corruption.

It doesn’t matter how good your policies are, how much money you allocate, or how clear your vision is—if the money leaks before it hits the ground, progress will remain stunted. And that is exactly what has plagued Uganda for the past two decades. From inflated contracts and ghost payments to endless project delays and shoddy workmanship, corruption has undermined nearly every sector meant to drive transformation.

Take roads, for example. Yes, we’ve built more roads in the last 15 years than in the previous 50. But how many of them are holding up? How many are still in warranty? How many feeder roads—essential for farmers to reach markets—are still impassable during the rainy season?

Health and education? Budgets have grown. So have the number of facilities. But too many schools still lack furniture. Too many teachers are underpaid. Too many health centres still run out of medicine. And somewhere in between the Ministry of Finance, the district engineers, and the contractor’s bank account—the money disappears.

We need to stop pretending that corruption is an unfortunate side effect of development. It is the primary reason we are not where we should be. Uganda could have done even better—much better if we were simply more honest with ourselves and our institutions.

That said, let’s thank God we are no longer in the 1980s.

Those were the years of price controls, ration queues, government monopolies, and empty shelves. Uganda back then was a textbook case of economic collapse. The liberalisation of the 1990s and early 2000s—controversial as it was freed the market, brought in private capital, and allowed enterprise to flourish. Without it, there would be no MTN, no Airtel, no mobile money, no supermarkets, no telecom towers. We would not be discussing AI, chip design, or e-commerce as part of Uganda’s future.

So yes, we’ve come far. We are stronger, more diversified, more regionally connected, more digitally savvy, and more economically active than we were fifteen years ago.

But we must now turn that growth into dignity.

Dignity for the mother who walks five kilometres to a health centre and finds no midwife. Dignity for the farmer whose road washes away each season. Dignity for the child sitting in a classroom with no desk, no books, and no teacher.

Growth is good. But dignity is better.

Because at the end of the day, progress isn’t a PowerPoint slide. It’s the borehole that works. The classroom with a roof. The hospital with medicine.

Uganda has shown it can grow. Now let’s prove we can grow well.

BOOK REVIEW -- THE LEXUS &THE OLIVE TREE VS CHIP WAR

I recently read ChipWar by Chris Miller — a riveting account of how the semiconductor became the world’s most important technology and, by extension, the nerve centre of 21st-century geopolitics. As I turned the pages, I couldn’t help but contrast its thesis with that of Thomas Friedman’s The Lexus and the Olive Tree that I read about two decades ago.

Reading the two side by side, one gets a sense of how the world has changed — and hasn’t. Friedman was writing at a time when the buzzword was “globalisation,” and there was a kind of religious conviction that the market, the internet, and capital flows would knit the world into a single prosperous village. That vision now feels quaint, almost naïve. Miller’s narrative, meanwhile, is one of choke points, technological bottlenecks, and the fragility of interdependence.

The two are particularly interesting in understanding the happenings in the Middle East, I think.

Friedman’s “Lexus”, which name I recently learnt was an abbreviation for “luxury export to the US”,  was the symbol of progress: high-tech, efficient, and global. His “Olive Tree” was the reminder that identity, culture, and history still matter — and often collide with the Lexus in unpredictable ways. In Gaza, in southern Lebanon, in the Red Sea, we are witnessing just such a clash. The global supply chain hums along, until it hits a blockade — metaphorical or literal — thrown up by actors who feel excluded or endangered by the global system.

Friedman’s hope was that the gravitational pull of the global economy would discipline states and societies into predictable behaviour. You don’t throw rocks at the Lexus showroom if you’ve got one parked in your garage. But as the current crisis shows, not everyone got the Lexus, and the Olive Tree has deep roots. In fact, the more globalised the world has become, the more some have doubled down on identity, resistance, and sovereignty.

Where Friedman saw a flattening world, Chris Miller sees a world stratified by silicon — specifically, the chip. Chip War

argues that semiconductors are not just components of technology but weapons of statecraft, economic leverage, and military dominance. The entire global system runs on chips — from AI and cloud computing to missile guidance and cyber surveillance. And crucially,

no one country controls the whole supply chain.

The Middle East, too, is entangled in this chip narrative. Iran has been desperate to circumvent sanctions by building its own tech capacity. Israel’s dominance in drone technology, cyber tools, and precision warfare depends on cutting-edge chips. The Gulf states, meanwhile, are investing in AI and digital infrastructure as part of their post-oil futures. And yet, almost none of them can produce the chips they need. They are at the mercy of a fragile, globally dispersed supply chain — one increasingly weaponised by the likes of Washington and Beijing.

The chip is the new oil — but it’s even more volatile.

Take the Houthis in Yemen. A militia with rudimentary drones has managed to disrupt global shipping in the Red Sea, sending freight costs soaring and rerouting traffic around Africa. It’s a vivid example of what Miller and Friedman both recognised in different ways: globalisation has empowered non-state actors in unprecedented ways. The Houthis don’t need to hold a capital city to project power; they just need a drone, a grievance, and a global market to disrupt.

And the consequences aren’t confined to the region. A spike in insurance premiums in the Suez Canal or a supply delay for Taiwanese chips affects the global economy. The butterfly effect of a regional flare-up now has boardroom and battlefield consequences from Frankfurt to Free Town.

This fragility — what Miller calls “the bottleneck economy” is the reality we now inhabit. Whether it’s ASML’s lithography machines in the Netherlands, or Taiwan’s TSMC factories, or Israel’s tech corridors, the supply chain that undergirds the global economy is a high-wire act. And when tensions rise in the Middle East, the whole system wobbles.

What both The Lexus and the Olive Tree and Chip War remind us is that power is no longer just about tanks and territory. It’s about networks, chips, and narrative. And the Middle East, long seen through the prism of oil and ideology, is now a front in the battle for technological and supply chain supremacy.

But to me, perhaps the deepest insight comes from the contrast between the two books. Friedman saw a world where prosperity would temper politics. Miller shows us a world where technology is politics. And in the Middle East today, the Olive Tree hasn’t been uprooted — it has simply grown into the data centres, missile batteries, and AI command rooms of the region’s new power players.

The old conflict over identity, territory, and belief now plays out with silicon and software layered on top.

In the end, the question is not whether the Lexus can outrun the Olive Tree, or whether chips will replace bullets. It is whether we are ready to govern a world where both coexist in a deeply unstable equilibrium. A world where prosperity and progress are still possible — but only if we understand the new rules of power.

And those rules are being written — in code, in silicon, and increasingly, in the sands of the Middle East.

For a small, pre-industrial country like Uganda, the lessons from Chip War and The Lexus and the Olive Tree

are both sobering and instructive. In a world where technological supremacy defines geopolitical clout and where global supply chains are both opportunity and threat, Uganda must recognise that digital sovereignty and data infrastructure are the new frontiers of development and security. While we may not build chips, we must invest in local talent, protect digital infrastructure, and strategically align with global tech blocs.

In a world ruled by chips and chokepoints, staying non-aligned is not a strategy. It’s a vulnerability. Uganda must leapfrog wisely—choosing the right alliances, building digital capacity, and anchoring the Olive Tree in the soil of a fast-changing global order.

 

THE UGANDA BUDGET: CLOSING OLD GAPS, OPENING NEW OPPORTUNITIES

Uganda’s 2025/26 budget, clocking in at sh72 trillion—approximately $19 billion, or nearly five times the size of the country’s $4 billion economy in 1986 is a striking symbol of how far the country has come. It reflects three and a half decades of relative macroeconomic stability, revenue growth, and ambition to deliver public goods and spur transformation.

The budget’s scale is a response to both promise and pressure. It seeks to expand infrastructure, finance social programmes, repay debt, and support livelihoods. It also continues a long-term strategy to bridge historical gaps—especially in public infrastructure, created by decades of neglect during the 1970s and 1980s. Those years of political instability and economic decline left Uganda with little to show by way of roads, power plants, or functioning institutions, even as the population doubled.

Successive budgets in the 2000s and 2010s have attempted to address this backlog, and the 2025/26 budget is no exception. With sh4.5 trillion allocated to roads and sh2.3 trillion to energy, the investment continues—reflecting an understanding that without strong infrastructure, the goals of industrialisation and regional trade competitiveness will remain elusive.

The commitment to infrastructure is not new.

In 2011/12, infrastructure spending was just under sh3 trillion. A decade later, in 2021/22, it had more than doubled. In contrast, allocations to education and health— sh4.2 trillion and sh 2.8 trillion respectively in this year’s budget—have grown more slowly, often falling behind both inflation and population growth.

Infrastructure’s share of the development budget has consistently outpaced social sectors, underscoring government belief in its catalytic role. But the imbalance raises a fundamental question: are we building structures faster than we’re building the people to run and benefit from them?

Even so, legacy gaps cannot be solved with money alone.

Uganda’s Achilles’ heel has been the long and inefficient project execution cycle. Major projects such as Karuma Dam have taken far too long to complete, delaying their contribution to growth. If project timelines were shortened and efficiency improved, the country could begin to realise returns on investment faster.

At over sh96 trillion—roughly 52 percent of GDP—public debt is still within sustainable bounds by international standards. Yet the trend is worrying, particularly because of the increasing share of commercial and non-concessional loans. This year, sh19.8 trillion, or 28 percent of the national budget, will go to debt servicing alone—resources that might otherwise have gone into education, health, or job creation.

Even more pressing is the growing mountain of domestic arrears, now estimated at sh14 trillion. That figure has more than tripled since before the COVID-19 pandemic and represents unpaid obligations to suppliers, service providers, and contractors. These arrears starve the private sector of liquidity, especially small and medium enterprises that are often ill-equipped to wait months—or years for payment. Tackling this backlog must be a priority if government spending is to translate into economic activity.

On the social front, the government is pushing ahead with the Parish Development Model (PDM) and Emyooga programmes as vehicles for inclusive growth. While the national impact of these initiatives has so far been limited and uneven, green shoots are beginning to emerge.

In some districts, SACCOs have started to disburse funds effectively, with early signs of increased incomes and improved household resilience. The challenge now is to consolidate these gains and scale best practices across the country, ensuring that these programmes are not just disbursement vehicles but agents of lasting transformation.

Education and health continue to be under strain. Despite gradual budget increases—sh4.2 trillion and sh2.8 trillion respectively in this cycle, these sectors face growing burdens from a rising population, ageing infrastructure, and underpaid personnel. While the numbers suggest progress, the systems themselves remain overstretched.

On the revenue side, URA’s digitalisation and enforcement drives are projected to bring in sh32 trillion in domestic revenue. That’s a significant step up from previous years. Yet the challenge persists: the tax base remains narrow. Much of the informal economy still lies beyond the tax net, meaning the burden continues to fall disproportionately on the formal sector—already under pressure from high compliance costs and limited access to affordable credit.

Importantly, the budget allocates sh7.1 trillion to defence and security—more than the combined allocation to health and agriculture. At first glance, this might seem misaligned with social and economic priorities. But Uganda’s history offers context: without stability, development is impossible. The investment in security has underpinned the growth we see today. It has enabled long-term planning, encouraged investment, and facilitated regional trade. In a volatile neighbourhood, Uganda’s relative calm is a competitive advantage—and one that must be maintained.

That said, the balance of spending still invites scrutiny. Agriculture—the backbone of the economy and the largest employer receives just sh1.8 trillion. Tourism, a top forex earner, gets sh220 billion. Government has argued in the past that all the allocations in security, infrastructure and social services aid agriculture, but it is also true we need to ramp up investment in extension services, water for production and access to quality inputs.

The allocation to science, innovation, and digital transformation remains small relative to their potential impact. If Uganda is to harness the productivity of its youth bulge, more deliberate investment in high-growth sectors will be needed.

The 2025/26 budget reflects a country still in the thick of transition. It attempts to correct for the past, meet the demands of the present, and chart a path toward the future. The ambition is evident. The implementation, however, must improve. Without faster project execution, stronger accountability, and a more productive use of borrowed funds, the gains of today may not be enough to sustain the Uganda of tomorrow.

BANKS ARE QUIETLY WINNING — BUT FOR HOW LONG?

Uganda’s banking sector doesn’t scream success. It doesn’t thump its chest or light up headlines. But make no mistake: it is quietly, efficiently, and methodically winning.

The numbers from the Uganda Bankers Association’s 2024 report are hard to ignore. Total assets for the sector reached sh48.2trillion, up nine percent from sh44.3trillion in 2023. Net profits after tax came in at sh1.58trillion—the highest in the sector’s history—rising from sh1.45trillion a year earlier.

At first glance, this looks like a continuation of the same old story: steady growth, strong balance sheets, healthy profits. But dig a little deeper, and you’ll see a sector entering a new phase. One where scale isn’t enough. Where efficiency, caution, and digital fluency are now the currency of banking success.

Start with the deposits. Total customer deposits grew to sh39.8 trillion

, a shade over eight percent from 2023’s sh36.8 trillion. The local currency still dominates, accounting for 69.8 percent of all deposits, but that’s down from 72.4 percent the previous year. It’s a gentle signal—nothing alarming yet—that confidence in the shilling is softening at the margins. With government borrowing still crowding out the private sector and the exchange rate under pressure, depositors seem to be hedging their bets.

Then there’s the loan book. Loans and advances to customers ticked up to sh22.3trillion, up from sh20.7trillion in 2023. A respectable 7.7 percent increase. But it’s where the money is going that matters. Trade continues to eat the lion’s share at 20.9 percent, followed by personal loans, building and construction, and manufacturing. Agriculture, despite being the lifeblood of the economy, still only claims 8.3 percent of the loan pie. That’s a structural failure, not just a commercial decision.

Meanwhile, the cracks are starting to show. The Non-Performing Loan (NPL) ratio nudged upwards to 5.3 percent, from 4.9 percent last year. In absolute terms, NPLs now stand at sh1.18 trillion

, up from sh1.01 trillion. And while banks are beefing up their provisioning—sh515.2 billion set aside for bad debts, up 14.5 percent the deterioration in asset quality is a clear warning. This isn’t a crisis. But it is a reminder: growth without rigour is just a risk postponed.

And yet, despite it all, banks are thriving. Their capital base grew by 12.6 percent—from sh6.12 trillion to sh6.89 trillion—bolstered by profits and, in some cases, fresh capital injections. That’s not just a regulatory requirement. It’s a strategic decision. With the government scaling back its borrowing appetite and returns on treasury paper likely to flatten, banks are turning back to their core business: financial intermediation.

But here’s the catch.

The industry is still highly concentrated. The top five banks—Stanbic, Centenary, ABSA, Standard Chartered, and Equity—hold over half the assets and profits. The rest of the sector is jostling for relevance. And while smaller banks are growing quickly, they’re still playing catch-up. The market remains skewed, with smaller players struggling to break out of their niche comfort zones.

Digitisation, meanwhile, has gone from buzzword to baseline. Mobile and internet channels now dominate transaction volumes. The branches haven’t disappeared—but they’ve changed. They’re leaner, meaner, and no longer the centre of the banking universe. The upside? Lower costs, faster service, broader reach. The downside? Digital fraud, customer alienation, and growing concerns about transaction fees—especially for low-income users who don’t understand the fine print until it’s too late.

Still, the shift is irreversible. And the banks that have invested early in systems, security, and customer education are now reaping the benefits. They’re not just pushing apps—they’re building ecosystems. From payments and savings to insurance and microloans, the smartphone is fast becoming Uganda’s de facto bank branch.

And yet, the elephant in the room refuses to budge: cost-to-income ratios. Despite all the innovation, the sector’s average sits stubbornly above 50 percent. That’s high by regional standards and leaves little room for error if interest margins tighten. It also means banks will continue to pass costs onto customers—whether through fees, spreads, or service limitations.

So what does all this mean?

It means Uganda’s banking industry is in transition. From analogue to digital. From scale to efficiency. From top-line growth to bottom-line discipline. The profitability is real, but so is the fragility. The sector is walking a tightrope—between opportunity and exposure, between transformation and turbulence.

The Bank of Uganda has done a solid job of macroprudential supervision. Liquidity levels are healthy. Capital adequacy ratios are being met. And there’s no sign of systemic stress. But if the regulator wants to future-proof the industry, it will need to think beyond compliance. How can capital be channelled into productive sectors? How can banks be nudged to lend more to agriculture, to green energy, to local manufacturing? And how do we ensure that banking becomes a tool for transformation, not just transaction?

Because here’s the uncomfortable truth: for all their profits, banks are still not lending enough to the sectors that matter most.

And that’s not just a policy challenge. It’s a commercial opportunity.

There is money to be made in lending to agro-processing, to SMEs, to women-led enterprises. But it requires different tools, different risk models, different appetites. It requires banks to reimagine what it means to serve—not just the salaried, but the self-employed. Not just the formal, but the informal. Not just the central, but the peripheral.

Uganda’s banks, in 2024, are more profitable than ever. More digital than ever. More capitalised than ever.

But are they more inclusive? More developmental? More catalytic?

That’s the next frontier.